Should advisers come down a level?

The American publication, Visual Capitalist, recently wrote about the hierarchy of financial needs and the important role that financial advice plays in helping people to work their way through the different levels.

The financial needs hierarchy follows a similar pattern to Maslow’s pyramid and highlights how our finances affect our basic, psychological and self-fulfilment needs.

Level one: cash flow and basic needs

At the base is the need to cover the fundamentals, such as food, housing and daily expenses. Although it’s not explicitly featured in the pyramid, debt and how to manage it will no doubt play a major part at this level.

Level two: financial safety

This involves being able to buy insurance and having a ‘rainy day’ fund – money set aside to be used for emergencies or unforeseen circumstances. Ideally such a fund should cover a minimum of three months living expenses.

Obviously, with Covid-19 continuing to exert huge pressure on the finances of a great deal of households, there will be many struggling to reach even this level. Research by the charity Shelter found that over a third (37%) of working families in England could not cover housing costs for more than one month in the event of job loss.

Level three: accumulating wealth

For people fortunate enough to have a steady income and some money put aside, accumulating wealth is next and moves into the psychological needs area.

This is where you’d expect advisers to step into the picture, but I’m not convinced this is borne out in reality. For a number of reasons, people starting on the road to growing their savings are often likely to turn to online do-it-yourself investment schemes, particularly given the absence of decent interest rates at banks and building societies.

There are huge opportunities for advisers to step in at this level and there’s a real need for this to happen. Investment managers can also help by lowering or removing the amount of investment required to access portfolios.

Level four: financial freedom

It’s at this level that professional financial planning and advice traditionally kicks in. Alongside managing wealth accumulation, it focuses on life choices, such as retirement planning, holidays and children’s education. Having the freedom to make choices is a strong psychological need in humans.

Level five: Legacy:

This is the level of ‘self-actualisation’ – the goal that many have worked towards. A key area for advisers as it involves estate, tax and business succession planning. These are people who have reached the top level of the financial needs pyramid, with high levels of financial security and a focus on helping the next generation, or other worthy causes.

There’s no doubt that the Covid pandemic will make it harder for individuals to progress through these levels. However, people are now in need of advice more than ever so it is up to advisers (and investment providers) to ensure that the advice gap doesn’t widen further when this crisis has passed.

If you’d like to find out more about what we’re doing to open up investments to people with differing levels of assets, please contact me at