EXECUTIVE SUMMARY
The purpose of this review is to provide an overview of research on current money advice giving methods and to assess their relative costs and effectiveness for different client groups. By highlighting gaps in knowledge, it is intended the review will help to direct future research priorities.
The review's objectives were to:
1. Assess the effectiveness of different money advice giving methods
2. Capture the relative costs and benefits of different methods
3. Identify the types of clients who respond to/are reached by the different methods
4. Highlight any recommendations on how to improve practice and service delivery
5. Uncover inadequacies in either the quality, focus or scope of existing evidence and identify future research requirements
Overview and contribution
The review highlights a number of data gathering issues specific to the Scottish context as well as more general shortfalls in the current knowledge base. For example, while the impact of debt problems on individuals has been fairly well researched, there is a paucity of empirical evidence on the impact of advice itself (Pleasance et al 2007: 1; Williams and Sansom 2007: 1). Correspondingly, there is little understanding of the impact of (different) money advice giving methods over time, in relation to different population sub groups or individual health, well being and relationships. The economic consequences of debt escalation and attendant effects on local communities have also been neglected. The Pleasance (2007), Turley and White (2007), and Williams and Samsom (2007) studies on the impact of debt advice make important contributions to our understanding of individual experience of debt advice.
Specific information about indebtedness and debt advice in Scotland is limited. Findings indicate similarities across the UK in terms of patterns of indebtedness. Recent data suggests, however, that Scottish clients have the highest levels of debt in the UK relative to their income ( CCCS 2009). It is likely that client responses to debt advice interventions differ more in relation to being part of a particular population sub-group (unemployed, older people, women) rather than as a result of national identity or geographical location.
Despite a scarcity of evidence on the relative benefits of different advice giving methods, the review did uncover a number of practical recommendations on how to deliver a more successful service. These recommendations primarily relate to; how advice is communicated; when it is provided; whether services are client centred, how to respond to specific needs; developing staff training; service delivery and meeting unmet demand.
Findings
The majority of literature reviewed reported a clear positive impact of debt advice. Benefits included improvements in; emotional outlook; levels of stress, health and well being; levels of debt and income; knowledge and understanding; and relationships with creditors and family. Further outcomes included; increasing benefit uptake which in turn profits local economies; reducing debt as a factor in criminality and avoiding court action by improving negotiations between debtors and creditors; and decreasing student drop-out.
Although there is no quantification of relationship breakdown as a result of bad debt, anecdotal accounts do exist. Similarly, the resulting costs of divorce and family breakdown are not readily available. Research indicates that stress, depression and anxiety are the most common consequences of over-indebtedness.
This review did not uncover any systematic evaluation of the economic and financial consequences of debt in relation to; lost economic output, earnings and tax revenue; increased benefit claims and legal costs; the health service and local authorities; house repossession or local communities.
The research evidence suggests that:
The nature of debt
- the nature of debt itself is evolving with the cost of utilities, for example, taking over as the main pressure on debt clients' income
- the demographic profile of those in debt has altered with older people, for example, having proportionately more and higher debts than before
The impact of debt advice
- where research has been undertaken, there is clear evidence of the many benefitsassociated with receiving debt advice
- there is a significant tail-off in the benefits of debt advice over time
- there is a paucity of research on the impact of individual money advice approaches
Location
- substantial proportions of those in debt are getting advice from the wrong places and that many disadvantaged and 'hard-to-reach' individuals respond most effectively to outreach advice services
Preventative approaches
- financial capability initiatives have substantial cost benefits for the financial services industry and government while also helping individuals to manage their personal finances and either prevent or deal with debt more effectively
Conclusion
Whilst there is clear evidence pointing towards the overall benefits of debt advice for individual clients, there is a lack of systematic research on the different effects of specific forms intervention. The relative costs and benefits of different advice giving methods has also not been adequately addressed. Although there is some evidence to suggest that the benefits of debt advice tail off over time, this work could be strengthened and accompanied by suggestions about how to counterbalance this drift in effectiveness. As the demographic profile of debt clients has altered, particularly in relation to older people, our understanding of the impact of debt advice on different population subgroups has not kept pace with this change. Additionally, data on the specifics of debt advice outcomes in Scotland is limited. As a result, there remain unanswered questions about the best ways to provide debt advice to population sub-groups and specifically in relation to their longer term financial health.