By Pradeep Raman, Director of Digital, finova

It was the “defining mission” of Boris Johnson’s government, and thanks to a white paper earlier this year and a bill still making its way through Parliament, ‘Levelling Up’ lives on. However, if Levelling Up is to be more than a catchphrase, it will need the financial services industry to play its part.

As the government has put it, the Levelling Up agenda is a “moral, social and economic programme”. The aim is to address striking regional inequalities in the UK – much higher than in some other countries. And while the new Prime Minister, Liz Truss, avoided the term on taking office, emphasising tax cuts and growth instead, she also promised investment and jobs “in every town and city across the country”.

The agenda continues, and financial services are an inescapable part of it.

First, as the whitepaper recognised, homeownership is key to generating wealth. It is essential to delivering the outcomes of the Levelling Up agenda, and the paper commits to putting home ownership within more people’s reach. That cannot happen without mortgage lenders and financial advisers playing their part.

Second, the advice and financial tools that individuals can access more broadly is key to their success. Again, the white paper acknowledges this, at least for businesses. Financial capital is one of six critical factors (along with physical, human, intangible, social and institutional capital) that it states will drive Levelling Up.

On both these fronts, the industry and government need to work better together, and we must go even further.

Across the ages

The Levelling Up agenda, for instance, correctly identifies young people’s difficulties in getting on the housing ladder. Homeownership has fallen substantially in the last decade or so, from almost three quarters (73%) in 2007 to under two-thirds (65%) today. At the same time, the average age for first-time buyers has trended up and now stands at 34.

But the challenges go beyond young, hopeful buyers. The self-employed, freelancers and those with irregular incomes – the numbers of which have swelled in recent years – also often remain poorly served. Older borrowers, meanwhile, form an increasingly large part of the market as Britain ages. In the last quarter of 2021, over half of all new mortgages had a term that would end after the borrower was 65. Equity release, still a small part of the mortgage market, is growing fast and is an area where many in financial services need to improve their knowledge.

In short, the pool of potential borrowers’ requirements is more diverse, and the need for products and advice that take account of individuals’ specific circumstances is more critical than ever. Lenders and intermediaries must work together to meet these challenges, developing innovative offerings and advice that reach all parts of the market, as well as providing education on the range of options available for both young and old.

These measures will not only improve access to mortgages and other lending products to maximise homeownership, helping people of all ages make the best use of that important asset, but it will also empower customers to make more informed decisions and the best choices for themselves and their families when it comes to buying a home.

Education, education, education

The need for education, meanwhile, is a crucial point, and it stretches beyond mortgages – and beyond consumers. We need a two-pronged approach, focussing on improving education not just for those looking but also for financial professionals.

For consumers, that means raising awareness of less familiar options around lending, such as equity release or retirement interest-only (RIO) mortgages, and on financial wellbeing as a whole. It is, as the Money & Pensions Service puts it, “about having a good relationship with your money”.

Creating a better relationship with finances is needed for all ages, not just those looking to ensure a comfortable retirement, though. Teaching financial responsibility and tips for managing money could be particularly valuable for younger people, helping prevent issues later in life. The industry and government both have a role to play in addressing that.

The industry and government also, however, similarly have a role in ensuring financial professionals are educated and equipped to serve customers adequately. Within this, technology will play a major part. Indeed, technology can help brokers provide their clients with a better service support their financial wellbeing, for example by using more sophisticated tools for monitoring and addressing issues of vulnerability. Lenders and technology companies can play active roles in debt management, for example, spotting negative trends early and encouraging advisers to step in before customers slip into arrears.

Finally, we need to improve cooperation between regulators and regulated. The FCA and ICO must provide financial professionals with the proper support and guidance and encourage innovation. While the Regulatory Sandbox does a good job of fast-tracking some new ideas, it is limited. Just 36 companies receive support each year, meaning hundreds go without. More broadly, the government should foster an environment in which firms can provide guidance without fearing heavy regulatory repercussions.

A two-way street

This cooperation will be more likely to happen if there is more and better communication between government, regulators and those working in the financial services sector. At the moment, that is all too rare. It remains difficult for financial professionals to gain access to government or even regulatory bodies, such as the FCA, for help and advice. There is, even now, no clear avenue to engage with the FCA to discuss regulatory concerns.

At the same time, where advice comes down from the FCA, it’s often too vague to be actionable. Rather than provide clarity, it can cause confusion and therefore more concern within the market – sometimes leaving firms nervous about offering guidance that consumers badly need.

Smaller companies are at a particular disadvantage since much of the communication that does take place is with market leaders. It simply makes no sense for those with the fewest resources to receive the least guidance from the regulator. At best, it hinders growth and limits the personal development of financial services employees. At worst, it can undermine the regulator’s aim to protect consumers and improve the customer experience.

In this and many areas – whether it’s identifying the financially vulnerable, ensuring compliance, or freeing advisers’ time to focus on customers and their professional development – technology can help. But it can’t do it alone. It has to be combined with a concerted effort across the industry, government and regulators.

If we come together, though, Levelling Up can be achieved, and the financial sector can play a central role in tackling regional inequality in the UK – ensuring people get high-quality service and advice, whatever their age and wherever they live.