The disconnect between consumers’ self-perceptions and the reality of their financial health is striking, and suggests that financial services need to be doing something different. Findings from a recent Ernst and Young study—infused with insights from behavioral economics—point toward an exciting new path forward. Digital and mobile delivery, social media, gamification and lessons from physical wellness technology will all play a role. This new approach could catapult financial health and wellness from a “nice-to-do” to an essential and differentiating tool for customer and revenue growth.
The financial health paradox
New research from EY uncovers a yawning chasm between how consumers think they’re doing financially, and the actual state of their finances. Even more striking, the study suggests that improving consumers’ financial health will become one of the top imperatives in reframing consumer financial services.
The study asked consumers to rate their own financial health, and 83 percent rated themselves “good,” “very good” or “excellent.” Contrast this figure with what we know about their actual situation:
- 60 percent of Americans say they are financially stressed.
- 56 percent of Americans have less than $10,000 saved for retirement.
- 40 million American families have no retirement savings at all.
- 40 percent of Americans are not prepared to meet a $400 short-term emergency.
Fortunately, even though the vast majority of consumers rate themselves as financially healthy, the study found that most still want to improve. Importantly for bankers, the attractive 25-34 and 35-49 year-old age groups were most likely to be extremely or very interested in improving their financial health. Also relevant: mass affluent consumers are even more interested in improving than their mass market counterparts.