This is the third instalment in a four-part series, Personal finance: A public health emergency, aiming to use the analogy of public health as a tool for finding solutions to improve both individual and institutional financial health. The public health sector has tended to underrepresent the role of family, friends and communities in supporting health outcomes. The finance sector should not make the same mistake.
Health and social care in the UK has for many years championed the idea of ‘person-centred’ care. That is, care that recognises the unique characteristics, needs and preferences of the patient, and involves them at key stages of decision-making. It’s an ethos in line with ‘human-centred design’; placing the person/human/user at the centre of the design process to reach more effective solutions. The UK’s financial services sector boasts world-leading innovations that can be (at least partially) attributed to this approach.
But the very language used to describe this approach reflects an ‘individualistic’ attitude, emphasising independence and self-reliance over group interests. This mindset, embedded in our healthcare system, neglects the vital role of the community. Pharmacists, GPs, district nurses, physiotherapists and other professionals can help people in their own homes, and use their knowledge of the local community to provide more tailored advice. Meanwhile personal networks help individuals stay healthy by providing help and advice, and supporting each others’ mental health. Indeed, close-knit communities appear to have a health advantage - a phenomenon known as the Roseto effect.¹
- What about the financial services sector?
- Has obsession with individual needs come at the expense of a ‘community-centred’ approach?
- What role can the community play in (re-)building financial resilience?
Leveraging personal networks for financial health
The pandemic made acutely clear that family, friends and neighbours play a major role in health resilience. The government recognised this by encouraging people to form ‘support bubbles’ if they had additional needs. These close personal networks are also important for financial resilience. Family members often provide accommodation (facilitating savings), and gift or lend money to their loved ones, while friends provide advice on jobs, promotions or saving strategies. Financial institutions have recognised the importance of these personal networks in spreading risk: ‘springboard’ mortgages leverage the savings of others’ to support an individual’s house purchase. But they’re rarely targeted at friendship groups. Perhaps there’s an opportunity to better package a kind of ‘flatshare mortgage’ (perhaps with simpler legal agreements) that allows the younger workforce, struggling with high rent and house prices, to get on the property ladder.
Perhaps it’s time for a more radical change in finance: changing the unit of interest from an individual to a family unit - whatever shape that family might take.
According to a survey last year by Royal London, one-third of individuals in a couple believe they are ‘incompatible’ with their partner when it comes to spending and saving.² Even those who are compatible could no doubt benefit hugely from better financial planning: looking into spending habits, shared savings & investment opportunities, earning potential and so on.
A disruptive financial provider could challenge the person-centred approach to finance with this couple-, family- or household-centred approach. A household approach might make most sense given the fact that income is tracked at the level of the household by government bodies like the Office for National Statistics and the Bank of England. And in taking this approach, providers would have a much stronger picture of their customers’ finances, able to offer products and services better tailored to their needs and circumstances.
The role of community professionals in supporting financial health
The NHS has demonstrated increasing commitment to community healthcare in recent years. In its Long Term Plan (established in 2019) it promised an ‘expanded network of community healthcare professionals’, able to provide support tailored to the needs of the local area, keeping people independent for longer and better supported in their own homes.³
What’s the equivalent of a district nurse or a local pharmacist for financial health?
Who are the professionals in the community that are best placed to provide financial guidance to individuals or families? The resources they need are already available: the UK’s Money and Pensions Service (MaPS) offers good resources for what they call ‘MoneyGuiders’: ‘anyone who provides type of non-regulated money guidance to individuals or groups’.⁴ But which organisations are identifying and supporting these Money Guiders to have real impact?
Perhaps local councils could pilot a new kind of social worker that specifically addresses financial challenges for members of the community with more complex needs. The charity Groundwork provides a powerful case study. They have a team of ‘Green Doctors’ who visit vulnerable households to provide advice on energy efficiency and fuel debt. In 2022 the team visited 36,000 homes and their help added up to an annual saving of £5m for those households.⁵
Bank staff used to play the role of the community financial advisor. And many banks still try to present this image in their marketing. But, in striving for economies of scale, most no longer have this kind of a relationship with their customers. The gap has inevitably been filled by social media. Financial influencers, or ‘Finfluencers’, have surged in popularity in recent years, contributing to a rise in riskier self-directed investing. While many of these influencers are well qualified to offer financial advice, many more of them have no such qualifications, promoting poor advice and even illegal ‘get-rich-quick’ schemes.⁶
Now is the time for banks and other financial institutions to play a stronger role in providing advice and challenging misinformation circulating in physical and online communities.
If they aren’t brave enough to try TikTok, they could start with the neighbourhood app ‘Nextdoor’. Just as the police and emergency services use the app to spread public safety messages, financial service providers could share money management or investment tips tailored to the circumstances and preferences of the local residents.
The next generation of community banking
More radically, perhaps it’s time for a refresh of community finance models. It’s an idea that The Royal Society for the Arts (RSA) has been championing for some time. They’ve been working with the Community Savings Banking Association (CSBA) to create a network of ‘technology rich, multi-channel banks to serve the everyday financial needs of small and medium sized companies, ordinary people and local community groups’.⁷ Customers own the bank, which is managed by local people who lend to local businesses that they know and trust. It’s an ‘old’ idea calling out for an updated design: how do you make the process of setting up and running a community bank simpler, quicker, less risky? How do you make it appealing to customers who’ve only known the ‘traditional’ banking model? Perhaps the UK could learn from the US, where community banking is still the dominant model.⁸
One of the most impressive examples of health and social care innovation is the Buurtzorg Model of care. Developed by a social enterprise in the Netherlands in 2006 the model emphasises ‘humanity over bureaucracy’.⁹ Small nursing teams work in non-hierarchical, self-managed teams that are able to make clinical and operational decisions by themselves. They get coached and supported by a central team, not managed.
What’s the banking equivalent of the Buurtzorg model of social care?
Sweden might have the answer. Svenska Handelsbanken, a 100-year-old bank, follows the principle: ‘the branch is the bank’. Each branch is free to make their own decisions about lending, marketing, customer service and so on. They don’t have fixed targets but rather track performance against the market average and other branches. And the bank has been more profitable than the average of its peer banks for more than 40 years.¹⁰ Is it possible to recreate this success without the need for a physical branch? We’d love to see an organisation try.
Whether formal or informal, personal and community networks are crucial to both physical and financial health. There are so many opportunities for institutions to better leverage these networks to improve the health of their customers, and ultimately the health of their organisation.
Curious to explore this topic further? Check out Personal finance: A public health emergency for more insights and learnings.
In conjunction with this article series, we’ll be running workshops connecting people in industries like finance, healthcare, politics, design and beyond to expand on the emerging ideas and find opportunities to bring them to life. No matter what your role, we’d love to get you involved - please reach out to [email protected] if you’re interested.
- https://www.longtermplan.nhs.uk/wp-content/uploads/2019/08/nhs-long-term-plan-version-1.2.pdf. p14
- Bearne, S. (2023). ‘Energy bills: how a visit from a ‘green doctor’ can help Britons save’. The Guardian, 04 July. Available at: https://www.theguardian.com/money/2023/jul/01/energy-bills-green-doctor-save-groundwork-charity
- Greeley, B. (2021). ‘How US community banks became ‘irreplaceable’ in the pandemic’. 29 Aug. Available at: https://www.ft.com/content/4face0c6-c1fb-47af-972b-8749e92b4baf
- Dignan, A. (2019). ‘Brave New Work’, Penguin Random House. p.94