1. Keeping you connected to today’s UK financial services market
Welcome to the second edition
of viewpoint, Harris Interactive’s
UK financial services newsletter.
In this edition we take a look at the
serious issue of consumer debt and
how financial institutions can help
consumers with financial planning.
We hope you find this newsletter
informative and useful. If you wish to
find out more about the work we do
within the financial services industry
please get in touch.
Frances Green: Financial Services
Director
Peter Shreeve: Senior Consultant
Financial Services
Research
In a 1999 pre-budget statement,
Gordon Brown famously quoted
"Under this Government, Britain
will not return to the boom and
bust of the past.”
Since May 1997, consumer
borrowing has risen by more than
290% to £1,460bn. As fast as
lenders could offer cheap credit,
we all consumed.
As we now emerge from the
deepest recession since the war,
what is the state of consumer
borrowing currently? What has the
impact been for consumers? How
can we help consumers today and
how can we instill greater financial
discipline for tomorrow?
Consumer Debt
The latest figures for consumer
borrowing do not make a pleasant
read. Consumer Britain currently
owes almost £9,000 per household
(excluding mortgages) and
including mortgages the average
debt per adult is over £30,000
(131% of average earnings).
From our Harris Poll survey around
a third of the UK population is
either ‘extremely or very
concerned’ about the levels of
consumer debt in the UK.
Consumer Debt and Financial Capability
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ISSUE 2 - MAY 2010
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Contact us if you would be interested in potential IFA and Consumer research around the
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likelihood to seek financial advice and how IFAs are responding.
Total Consumer Debt
Total Secured on
Dwellings
Total Unsecured
Lending
Credit Crunch
Other Unsecured
Lending
£Billions
0
200
400
600
800
1,000
1,200
1,400
1,600
Consumer Borrowing
May 1997-March 2010
Source: Bank of England
01May97
01Nov97
01May98
01Nov98
01May99
01Nov99
01May00
01Nov00
01May01
01Nov01
01May02
01Nov02
01May03
01Nov03
01May04
01Nov04
01May05
01Nov05
01May06
01Nov06
01May07
01Nov07
01May08
01Nov08
01May09
01Nov09
STRIKING NUMBERS
9,500
number of new debt problems dealt with
by CAB each day
£58,083
average household debt
£187m
personal interest paid in the UK daily
every 11.4 minutes
a property is repossessed
1,841 people
made redundant every day
every 3.69 minutes
someone will be declared insolvent or
bankrupt
£397,500,000
daily increase in Government national
debt (PSDN)
The state of
consumer
borrowing
Impact on
consumers
How the industry
can help
Financial
capability

2. As we lived through the boom
years, consumers shopped on
cheap credit, trading in on their
rising property valuations. Looking
back it was clear this could not
continue, but where has that left
us now?
Impact on Customers
Unsurprisingly, the rise in
consumer debt corresponds to a
rise in individuals struggling with
their credit arrangements and
seeking help. During 2009, The
Citizens Advice Bureau (CAB) in
England and Wales saw a 24%
increase in debt enquires and is
currently dealing with 9,500 new
debt problems every day. The CCCS
(Consumer Credit Counselling
Service) is another organisation
that helps individuals who are
struggling with their credit
arrangements. In 2009, the CCCS
received around 335,000 calls, a
26% increase with a further 150,000
seeking help online via Debt
Remedy. From our Harris Poll
survey, over a quarter of the public
are either finding keeping up with
their financial commitments a
constant struggle or have now
fallen behind and are experiencing
financial difficulties.
Sadly, over the past few years, we
have also seen a significant rise in
the number of individual voluntary
arrangements and bankruptcies
but just looking at the figures does
not describe the severity or the
heartache behind each statistic.
Stress, depression, repossessed
homes and one-parent families are
just some of the consequences of
debt. The challenge is to get
consumers to think of these
possible outcomes before taking
out their next loan or credit card.
Financial Capability
We cannot place the blame for the
crisis solely at the door of the
lenders. The government and
consumers themselves also have to
share responsibility and the public
agrees.
Over the past few years, the figures
show that many people have taken
financial risks they could not
afford, and have also not been
saving for their retirement.
Issue 2 | May 2010
Consumer Debt and Financial Capability
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Continued on page 3...
Who do you think is most responsible for the increased levels
of personal debt in the UK?
Everybody has part
responsibility
Lenders
The Government
Individuals themselves
None
2%
32%
29%
20%
17%
Individual Voluntary Arrangements
140,000
120,000
100,000
80,000
60,000
40,000
20,000
NumberofIndividuals
Date
Individual insolvencies in England and Wales
Source: Insolvency Service
Source:
Harris Poll Omnibus April 2010. All
respondents 2080
Debt Relief OrdersBankcruptcy Orders
0
1997
2009*
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998

3. Issue 2 | May 2010
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Aggregator and other financial
websites have certainly helped to
make consumers more savvy. They
have provided the tools and the
know how to find the best deal i.e.
cheapest credit but they have not
necessarily helped to instill good
financial discipline or judgment.
I wholeheartedly agree with the
government aims of increasing
consumer financial capability and
some of their tactics are rightfully
more long term, aiming to change
consumer attitudes and behaviour.
From our Harris Poll survey, there is
clearly a need to demystify and
reconnect the public to the indus-
try, as almost a quarter feel
intimidated by finance or find
finance complex with a further 13%
finding finance boring.
However, with debt levels
increasing consistently for a number
of years, the Government initiatives
are a little bit like shutting the
stable door once the horse has
bolted.
The government’s position also
appears to be a little
inconsistent. On one hand, they are
trying to increase people’s
knowledge and understanding
through these initiatives. On the
other hand, the current Retail
Distribution Review,
although having many positives,
may actually deter those at most
need from seeking professional
advice when they find out the true
cost. Perhaps even pushing them
into self-service channels and
buying products that are not
suitable for them. We also have
rising student debt. Students
starting university now will leave
with an average of £23,000 of debt.
Helping Consumers and
Increasing Financial Discipline
The key to increasing financial
discipline has to be to get
consumers more engaged with their
finances, and this is where the
industry can help. The increasing
use of technology, especially
amongst the iPod generation, will
undoubtedly help with apps or text
alerts providing easy access to
Which of the following best describes your general attitude to financial
planning?
Relaxed approach to finance, tend to
do what’s most convenient
Confident and interested, I know
exactly what I want and how to get it
Good intentions, but find finance
complex and am unsure what to do
Bored by finance, consider it a
necessary evil
Feel intimidated and confused by
finance, and usually need help
Unsure
30
25
20
15
10
5
0
%
2828
15
13
7 8
How can financial
service providers
help customers to
better plan and
manage their
finances?
Source:
Harris Poll Omnibus April 2010. All
respondents 2080
Source:
Harris Poll Omnibus April 2010.
Base: Those who responded 1048.
More
responsible
lending 28%
Offer advice, budget
planning, education
15%
More flexibility, help
people in debt 8%
Lower lending
charges 12%
Simplify
products
and product
literature
13%
Change general
attitude (Honesty,
openness) 13%

4. Issue 2 | Mayl 2010
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Article by Philip Brooks
Associate Director
Financial Services Research
For further information related to this article, such as the background data, or to suggest new topics for
inclusion please email financial@harrisinteractive.net or call +44 (0)161 615 2300
For more information on our financial services research practice visit: http://www.harrisinteractive.com/europe/industries_financial.asp | PAGE 4
current balances etc. It is just a
shame that some institutions see
this as an opportunity to generate
extra income.
Whilst consumer demand for greater
and faster access to their accounts
has increased, providers must not
forget the importance and influence
of personal contact. When we asked
the public about how the industry
can help customers better plan and
manage their finances, apart from
more responsible lending they asked
for help (advice) from a more honest
(unbiased), open and caring
industry.
Direct contact from the industry will
certainly help consumers engage
more with their own circumstances.
Given the current state of the
industry, perhaps there is a need
now to return to old style banking
with greater levels of personal
contact. Consumers facing
difficulties would certainly
appreciate financial providers taking
the lead and instigating dialogue as
long as providers communicate in a
caring and empathetic way,
providing consumers with the help
and support they need.
In this instance, targeting those
individuals who have a number of
credit agreements in place and
calling them in for a review.
Providers could then offer advice
and help with budget planning and
present customers with their
options.
Doing so will hopefully help steer
customers away from the
proliferation of private debt
management companies or even
worse door-to-door lenders whilst
portraying a caring and helpful
organisation. There are a number of
financial providers that could do
with improving their reputation at
the moment.
Those financial providers that fail to
change their corporate image are
certainly going to find life much
tougher once new entrants such as
Virgin Money, Metro and Tesco
enter the fray promising a more
personal approach and with a
reputation for greater customer
care.
Present financial planning as a
means for customers to achieve
something good or avoid
something bad. They should
provide an overall review.
Send leaflets out to people, as
they do not know where to go.
Spend a bit more time with
people discuss a plan so they
can understand it better.
By being honest and realistic with
them and giving them advice in
their own interest and not that of
their employer.
By keeping an eye on the
customer, offering real honest
help when needed.
By tailoring to the individual
customer's needs, in a simple and
straightforward way putting the
customer's needs first.
They should try much harder to
be honest and ethical. I feel they
just look at the numbers and
forget they are
dealing with people.
Offer technology-based domestic
planning services, incorporating
into bank statements ‘committed’
spend and 'available' spend.
Fig: f
Fig: a
Fig: b
Fig: c
Fig: d
Fig: e
Fig: g
Figures a,b,c,d,e,f, g: Verbatim Responses
Q: How can financial services providers help
customers to better plan and manage their
finances?