Six years after sharing money-related anxieties, consumers are still seeking the financial industry’s attention

A look backward: Six years after the release of the innovative Nonfiction Research report “The Secret Financial Lives of Americans,” the financial anxieties it explored in such vivid detail still persist among US consumers.

• But it’s unclear whether financial institutions (FIs) are ready yet to heed what the report’s authors called the “Hurricane Katrina-level” warning that modernization of financial services must come, not just through technology, but through customer-centric services.

Why it matters: The report concluded that FIs are vulnerable to disruption by any provider that directly addresses the stresses underlying the “double lives” that US consumers are living as they struggle with managing their personal finances.

• More than four years in the making, and based on a 2018 survey of more than 2,000 respondents, as well as 150 pieces of secondary research, the report also interviewed banking executives and some unusual sources, like a bank robber and self-identified shopping addicts.

The findings: Though family, friends, and neighbors think most consumers’ lives look normal, even prosperous, particularly on social media, many are secretly in dire financial straits. In prepandemic 2018—what many now think of as good times—the survey respondents reported extreme stress related to money.

• 52% of respondents had broken down into tears over money.
• 37% of respondents had gone to sleep hungry because of money.
• 44% of respondents would have been unable to cover a $400 emergency without either selling something or borrowing money. That money came from family (63%), friends (35%) and coworkers (17%).
• 33% of nonretired respondents said they hadn’t saved anything for retirement.

Pop culture and social media added to the pressure to appear successful: The report suggests they’re responsible for changing consumers’ lifestyle expectations by giving them unprecedented views of wealthier individuals and by letting people share their own lives more widely than ever.

• In 2018, 28% of 18- to 24-year-old respondents said they posted to Instagram to make themselves look wealthier than they are. (TikTok didn’t become the most-downloaded app in the world until 2020.)
• 71% of respondents in that age group said they’d bought something they didn’t need because “they had to have it.”
• 19 million American consumers suffered from compulsive shopping disorder.

Contrasting data around consumers’ savings and expenditures, the report concludes that they were closing the gap between their actual income and their pop culture-fueled expectations by using money from the secret half of their double lives (savings accounts, potential retirement savings, credit cards) to finance the public part (vacations, home, shopping).

Consumers wanted help, but didn’t see the financial services industry as helpful: The report finds hope in consumers “irrepressible drive to do better” and “a better-than-average willingness to accept responsibility for improving their financial lives.” It lists eight areas where they consumers said they were open to coaching and guidance about their money troubles:

• Evaluating fair pay
• Maximizing salary in current job
• Planning career moves to increase earnings
• Monthly budgeting
• Right-sizing debt
• Planning affordable vacations
• Holistic financial life advice
• Dealing with spending pressures from status anxiety

But mainstream FIs didn’t provide these services then—or even consider them related to financial services. And most still don’t. The industry arose and evolved in piecemeal ways (banking, lending, consumer credit companies), and until recently, didn't see its role as helping consumers better their financial lives.

• Only 21% of respondents in 2018 reported working with financial advisors.
• As for banks, one respondent said “they’re hardly better than a mattress”—useful mainly for keeping one’s money safe.

The solution is a ‘personal CFO’: The report hypothesizes that FIs could profit from helping consumers achieve financial wellness—if they create an affordable service centered around a role called the personal CFO.

It compares the personal CFO’s function to a primary care physician, who would set goals, handle wellness checkups, identify potential issues, refer to specialists, and coordinate care among the many specialists into an integrated whole. A personal CFO would:

• Understand a client’s values and translate them into financial goals
• Create monthly budgets and project long-term financial outcomes
• Demystify personal finance and teach about behavioral finance pitfalls
• Help maintain or repair credit and right-size spending
• Coordinate with financial specialists as needed

The report concludes that FIs offering these services would own the client relationship, gain direct and indirect revenue, iearn consumers’ trust, and make hiring easy—presumably because it would attract the kind of people who turn to social work, counseling, teaching and other similar jobs centered around helping people and enhancing their well-being.

Our take: Directors and executives at FIs in 2018 told Nonfiction researchers that they were moving toward becoming more customer-centric. What they meant by that was digitization or mobile finance.

The report authors criticized the industry for being overly focused on new technologies when they should be looking at what services people want—even crave—but aren't able to get.

But that was six years ago, before the advent of genAI. Technology now has the potential to become the enabler for these holistic financial services. As we’ve discussed in our “Personal Finance Tools 2024” report, we’re closing in on tools that could bridge the gap between the financial help consumers want and the assistance FIs could potentially provide.