This article has been written with Fred de Jong

The number of households with financial problems increases, while the Dutch government expects more financial self-sufficiency from citizens and businesses. Many consumers are uncertain about their financial future. They are insufficiently prepared for the economic consequences of life events, such as premature death and disability. Our consumer research shows that the annual financial damage is at least € 750 million in The Netherlands. The financial service industry can support consumers in preparing for economic adversity. But that requires a different mindset.

Increased economic complexity for consumers and businesses leads to financial problems. The complexity comes from a combination of developments like the government's appeal for financial self-sufficiency, the increased supply of financial products with minor differences in content, and the significant political, social, and economic uncertainties. This combination of developments makes it harder for consumers to prepare for a financial setback. 

Mainly, financially vulnerable households are most at risk of financial hardship after premature death or severe illness. They lack the financial means to cope with setbacks, make limited use of financial advice, and often have not taken any measures. You can see examples in the Dutch television show "Steenrijk Straatarm" - people who, due to setbacks in life, have been condemned to debt restructuring and can no longer participate in social, cultural, or sporting activities. This group gets economically and socially excluded.

Most people worldwide know the Netherlands as a prosperous and wealthy nation. However, we live in a system that leads to €750 million in losses on an annual basis among insecure, financially vulnerable households who are not prepared for financial adversity. The result is more financial, social, and economic inequality. We live in an unsustainable system. 

The multiple value creation perspective for sustainable services

The current debate about our economic system's sustainability also affects the value and positioning of financial services. The Netherlands commits to achieving the United Nations Sustainable Development Goals with results in energy consumption, social welfare, and sustainable economic growth by 2030. The financial industry plays a critical role in achieving sustainability goals.

So far, actions by the financial services industry related to sustainability goals focus on energy consumption. For example, mortgage advisors have discovered sustainable housing as a new area to sell additional loans in favorable conditions. These practices express a narrow perspective on sustainability. And from an ethical standpoint, using sustainability as a springboard to more sales seems inappropriate. 

The public role of the financial sector goes beyond sustainable energy consumption. It also concerns sustainable economic development and an inclusive society. One of the responsibilities of financial services includes ensuring that people do not become financially and socially excluded. Our research shows great opportunities for the industry to improve in this respect. 

A different perspective on the performance of financial services 

Financial service providers generally achieve good business results (revenue, growth, returns, client satisfaction) by delivering services as products to those who can afford them. However, those results sustain the current system and blind us to unintended side effects like increased financial, social, and economic inequality. A different, more sustainable way of assessing performance is needed to ensure the financial inclusion of as many households as possible.

The single focus on business results as a measure of success is neither sustainable nor distinctive. The assessment of banks, insurers, and financial advisors should also include the social and ecological value they deliver. We call this 'multiple value creation’.

Multiple value creation requires a different mindset. The financial industry plays a crucial role in facilitating the development of solutions for social and environmental issues. That role differs from the traditional provider of financial services. Financial professionals capitalize on the experience, networks, and knowledge within the increasingly complex environment of clients to make a meaningful difference.  

Concluding thoughts

"If you do what you always did, you'll get what you always got."

Our research shows a prime opportunity for the financial industry to help consumers and households in the case of a setback with economic consequences. However, our study also reveals that many families in the Netherlands are unprepared when economic adversity occurs. If financial service providers continue to operate with a single focus on business results, that situation will likely worsen. 

Change toward a more economical, social, and financially equal society is possible when the industry focuses on multiple value creation. That requires a re-assessment of the role and value of financial services. 

A change in the industry’s mental model is required to ensure that advisors' work becomes more meaningful and safeguards people's inclusion after a financial disaster and misfortune. 

Want to learn more?

Do you want to know more about how you can help prevent social and economic exclusion? Subscribe to our newsletter or contact us directly.