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Finance

BOOM OR BUST: HOW THE FINANCIAL SERVICES SECTOR IS COPING

by Simon Black, CEO, Awaken Intelligence

 

Covid-19 has had an impact across all industries and businesses are feeling the sting. However, is it equally devastating within every sector? As industry and individual concerns grow during the inevitable economic crisis, financial services are seeing an increase in demand as everyone attempts to stretch every penny as much as possible.

By collating data from Trust Pilot and cross-referencing the demands for these services in the first half of 2019 compared to the same period in 2020, we take a look at how the financial sector is coping during the pandemic in both the UK and the USA. Both in the UK and across the Atlantic, there has been a significant increase in demand for these services. The UK saw a 175% rise, while the USA has seen a 47% rise.

The greatest increase has been seen within accounting and tax services, up 372% in the UK and 517% in the USA. Presumably due to companies seeking ways to extend and defer payments with HMRC and the IRS, while ensuring penalty fees are avoided. This was the only industry that gained more demand in the USA than in the UK.

Simon Black

While all financial industries saw an increase, the most significant difference between the two countries was the demand for real estate. The market in the UK has begun to reopen and a backlog of eager buyers and sellers are pushing the conveyancing process with an 87% increase on last year.

The USA is still struggling to control the virus, which has led to homeowners pausing their sales and buyers holding off on their search until both the economy and health return to normal, which has led to a meagre 3% increase.

Demand is up across the board, despite the public being unable to visit many of these service providers in person, banks are pushing their technology teams to digitalise their services as quickly and efficiently as possible to ensure they are available remotely. In a bid to handle the demand across the board, some businesses have started to use voice analytics software, a powerful piece of AI that helps contact centres increase efficiencies.

Real estate agents are providing digital tours of properties and insurance companies are growing their teams to meet the demand of customer service helplines for both claims and individuals now wanting to ensure they are covered against all eventualities previously not predicted.

Car insurance providers are seeing an increase in demand for their services as the public are seeking ways to reduce payments due to financial hardship. Insurers’ service lines are kept busy and in demand with requests to reassess risk levels as people are driving less and potentially waiving cancellation fees or processing fees for amending policies. This has led to an increase in demand of 311% within the UK for the insurance industry.

Credit and debit services have increased 52% in the UK but demand fell by -16% in the USA. In the UK, a change of circumstances has led to more people having to utilise overdrafts and credit cards to cover essential costs. In the US, unemployment insurance was expanded from three to four months, and temporary unemployment compensation of $600 per week was provided. This led to a drop in demand for Debt Relief Service, Credit Counseling Service and Credit Bureau services.

Customer service centres are also being inundated with requests for loan and mortgage payment holidays until their financial status changes. However, the USA has been providing citizens with Economic Impact Payments, which could be a contributing factor as to why less Americans are using credit services.

Investment and wealth services have seen just a 30% increase in the USA, compared to 119% in the UK as mortgage applications rise and businesses and individuals look for ways to secure their funds ahead of an economic downturn.

Despite apps and online assistance available to those who are looking for these services, these transactions are favoured with expert human input. With most of these businesses still closed for the protection of staff in the USA, this form of service has proven hard to keep up with resulting in a slight drop in 2020.

This sector is now witnessing the importance of having systems in place to allow clients to seek the advice they require remotely. Had this been implemented beforehand, we may have witnessed a similar rise to the UK who has begun to reopen.

Overall, the financial services sector has experienced lots of activity with consumers and businesses demanding seismic shifts in their financial support requirements, both in terms of products and services. Such demand is likely to grow as non-contact transactions and online activity become the norm.

Finance

HOW LONG DOES IT REALLY TAKE TO IMPROVE YOUR CREDIT SCORE?

Every time you borrow money in the form of a loan, credit card, hire purchase agreement, mobile phone contract or anything else, your credit rating will be impacted. In much the same way, your credit score is also affected each time you make a repayment to your debt, or miss a payment. The type of impact that each action has on your credit score will determine whether you have a low, average or high rating. Somebody who borrows a small amount of debt and makes all payments on time is likely to have a high credit rating, while on the other hand, if you have a lot of different debts and have struggled to make repayments and been late with a few in the past, your credit score may suffer.

Unfortunately, it’s a lot easier to get a bad credit score than it is to get a good one, and one missed payment can have a huge impact. So, how long does it really take to improve your credit score and what can you do to improve it quickly?

 

Don’t Expect Overnight Improvements

Thinking that your credit rating will immediately jump up once you have a paid a debt off is a common misconception that can leave you feeling disheartened if you work hard to repay debts only to find that nothing has changed. But, don’t worry, as long as you keep going, your credit score will definitely improve over time. Negative impacts on your credit score such as missed or late payments can stay there for six years and hold you back, but after that amount of time, your credit rating should get much better as long as you are still in control of your debt.

 

Paying Off Debt without Missing Repayments

If you have a lot of debt, this can negatively impact your credit rating even if you are making the minimum payment each month. Lenders are less likely to consider you as a low-risk candidate to lend money to if you are already paying off a lot of debt, and this in itself can cause your credit score to drop even if you haven’t missed any payments. As a result, the best thing to do is find a way to pay off your debts faster without it having a negative impact on any of them. Thankfully, there are several options that you might want to consider.

 

Debt Consolidation

Consolidating your debts is one of the best ways to get them cleared off and leave you with less to worry about. If you have a lot of smaller debts that you are dealing with, this can become hard to handle as you try to keep up with which payments are due at what times. In addition, having a lot of smaller debts also means that you are paying interest on all of them, meaning that over the long term, you’re paying back a huge amount more than you actually borrowed.

Consolidating your debts means taking out one loan or credit card that you will use to repay each debt. Clearing all your debts with the new loan means that you will only have one debt to worry about replying and one lot of interest to pay. If you have a bad credit score, you can find loans for bad credit scores at New Horizons. New Horizons is a regulated broker that works with a certified UK panel of trusted lenders to help you find the best loan for your situation.

 

Snowball Method

Another option that you may want to consider if you are averse to borrowing any more money is the debt snowball method. Using this method, you will repay the smallest debt first, then use the money that you would normally pay towards this debt to pay more towards the next debt up, which will get that one paid off faster. As you work through your debts, you will free up more and more money as each one is paid off, so that when you finally get to the largest debt, you are able to pay everything that you would have normally been paying towards all your debts combined straight to that debt to get it cleared quickly. Continue paying the minimum payment to all your debts as normal throughout the process so that you do not cause any damage to your credit score.

 

Debt Help

If you are struggling to make repayments to any of your debts, the above methods might not be ideal for you right now. Thankfully, there is help available. You can work with a company to get a debt management plan where the company will negotiate with creditors on your behalf in order to reduce your payments. Although this might mean that it takes longer to improve your credit score, it can prevent serious damage as the debts are still being paid off.

How long it will take to improve your credit score will depend on your situation and the method that you choose to clear your debts.

 

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Finance

SHOULD YOU TELL YOUR KIDS HOW MUCH YOU EARN?

By Kerry Sutherland, certified financial planner at Alexander Forbes

 

Many parents are reluctant to talk to their children about money, but these are important lessons to help them achieve financial independence when they are older – even if you aren’t a financial genius yourself.

 

As children get older, they notice their friends’ houses and cars of different sizes and have discussions on the school playground about their different holiday destinations. “In the senior phase of junior school, they work out very quickly that different incomes yield different lifestyles and this is usually when the question about income gets posed to parents,” said Kerry Sutherland.

 

Kerry Sutherland

“You can tell them that you understand they have questions about money and how much you earn, but answer it by saying let’s rather talk about what food, toys, stationery, extramural sporting activities cost, and if we can afford them and how, and about saving for things like holidays.”

 

Often the exact number is not meaningful to children, they rather want to use it for comparison purposes. “You need not tell your kids how much you earn, but you can use it as a motivator to encourage them to work harder at school if they wish to achieve a certain lifestyle as an adult,” said Sutherland.

 

When your children start with this line of questioning, Sutherland advises using it as an opportunity to discuss basic financial planning. “Explain to your kids that a lifestyle is not always about what you earn, but that it is also about how you manage your money. You can discuss budgeting, keeping debts as low as possible and of course the compounding benefits of long term savings. It is important to emphasise that it’s not wise to spend all you earn every month as when you reach retirement age, you must have saved enough to see you through your retirement years.”

 

“Telling your child how much you earn so that they can brag to their friends is unhelpful. If it’s to explain why you can’t afford a fancy holiday, then just explaining this will suffice. It’s also not necessary to treat it like a secret. If your adolescent asks, it’s important to be honest, open and authentic in your answer.”

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