Having spent many years meeting financial advisers up and down the country, I’m convinced that they represent an untapped source that could hugely contribute to tackling a major social issue – problem debt.
Debt charity Step Change – just one of many agencies working in this field – reported that over 170,000 clients completed debt advice with them for the first time in 2024.
Areas of debt on the rise included energy bills, following the huge hikes in energy costs in recent years, and council tax arrears, as council tax bills continue to rise faster than inflation.
It is tempting to assume that many people in problem debt are out of work, perhaps through unemployment or poor health.
However, StepChange has reported that around 3 in 5 of the people they are seeing are in some form of employment, and this proportion has actually been drifting up in recent years.
So, where do advisers fit in? Having trained as an FCA-regulated debt adviser myself, I’m convinced that while debt advice and financial advice are different, they require many of the same skills.
This makes me wonder whether many more advisers could be encouraged to volunteer as debt advisers and help far more people deal with what can be a crippling issue in their lives.
One coping strategy for people in problem debt is to bury their head in the sand, but this makes matters worse
For my part, I am a volunteer with a national network of local advice centres under the banner of a charity called Community Money Advice (CMA).
Along with Christians Against Poverty, CMA is an organisation that has a Christian ethos – but if that’s not for you, secular advice agencies such as Citizens Advice are also keen to recruit more volunteers to help with debt advice and other money issues.
My experience as a debt adviser is that every case is unique, but very often you are dealing with a multi-dimensional problem.
Everyone who comes to see you may have some money issues, but those issues are often accompanied by mental health problems, housing issues, addiction issues, a relationship breakdown and more besides.
Although training inevitably focuses on the nuts and bolts of debt, including things like how to obtain a debt relief order, there is an increasing focus on seeing the person, not just the facts and figures.
The pros and cons of giving debt advice
I have found that being a debt adviser can be both incredibly rewarding and incredibly frustrating.
On the positive side, I have seen clients with a weight lifted off their shoulders simply because they’ve brought in a pile of unopened letters and we’ve gone through them together and come up with a plan.
I find that one coping strategy for people who are in problem debt is to bury their head in the sand, and that often includes not opening letters, because when you are in debt, most letters are bad news.
The problem is that ignoring those letters usually makes matters worse.
Financial advisers have many of the skills to make a good debt adviser, including building a trusting relationship with a client
I’ve also been able to help people get debts written off and make a clean start, helping them to tackle some of the underlying causes which led to the debt arising and trying to avoid the same cycle repeating itself.
But sometimes, you find it hard to help someone. You may have a client with an addiction, which means that far more money is flowing out than they can afford.
Or, someone may arrange to meet and then repeatedly postpone, perhaps because they feel shame at the situation in which they find themselves.
How advisers can help
Debt advisers are not authorised financial advisers and are explicitly prohibited from offering regulated financial advice – and rightly so.
But financial advisers have many of the skills needed to make a good debt adviser.
The best financial adviser will be a good listener, will want to make sure they have all the facts before they come up with a recommendation, and will build up a good and trusting relationship with a client.The same is true of a good debt adviser.
Most debt advice charities will allow you to be flexible in terms of your time commitment, taking on debt clients as and when you have capacity to do so.
But I’m sure that these charities – and their clients – would appreciate it hugely if more financial advisers considered taking this step.
Steve Webb is a partner at pension consultants LCP, and was UK pensions minister from 2010-15
