PESTEL Analysis

Political factors

"Political factors are about ways in which the policies of a government and the impact that these policies affect people. These factors are coming from government people being like "I think people in our country are not spending too much money" Providers have to put up with rules, regulations, regulatory and consumer protection bodies. These regulatory and consumer protection bodies also ensure that providers do legal stuff. Crisis have shown that badly regulated financial institutions is a reason for us to regulate them. Better regulation back then could have helped us prevent the crisis. Crisis 07-08 resulted in many governments reviewing their regulations and creating a reform with an aim to make the systems more effective in terms of maintaining a sustainable global financial services industry and properly protecting consumers' interests. UK was member of the EU so we had to put up with their legislation too. Europe is aiming to create global market or at least market of EU at the moment. This means that her should be a high level of competition to ensure that consumers can choose the products and services that meet their needs + the best value for money. Overall regulations are sets of what providers can do and what the cannot, this includes the way in which they sell their products and services, advertisement, transparency, quality of financial advice and respond to complaints. Products can be complicated, regulation helps people to learn all the required and important information ('crystal mark') If people make wrong choices they can end up in jail or homeless so it's very important to regulate and government don't need these people. Financial Services Authority have been abolished after crisis and its responsibilities has been divided between FCA, FPC and PRA. (April 2013) Abolishing FSA had to return overall responsibility for regulating the financial services and maintaining the long-term sustainability of the industry. New bodies are responsible for enforcing the system of regulation that governs the financial services industry to maintain the stability and individual providers and consumers rights and their finances. Consumer doesn't always know what the product or service that they are buying is actually about. There were cases of mis-sold products. FCA regulates consumer credit and helps people to afford getting into debt (at least makes them to think about it so there is no mis-selling FPC is "charged with a primary objective of identifying, monitoring and taking action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the UK financial system. " PRA " is responsible for the prudential regulation and supervision of around 1,700 banks, building societies, credit unions, insurers and major investment firms. The PRA’s objectives are set out in the Financial Services and Markets Act 2000 (FSMA). The PRA has three statutory objectives: a general objective to promote the safety and soundness of the firms it regulates; an objective specific to insurance firms, to contribute to the securing of an appropriate degree of protection for those who are or may become insurance policyholders; and a secondary objective to facilitate effective competition." These three bodies that "form" FCA (which doesn't exist but eh) are responsible for enforcing the system of regulation that rules the financial services industry, maintaining the stability of the industry and individual providers, ensuring that people are treated fairly. FOS helps people to resolve what happened in the conflict between provider and consumer; If there was a regulatory issue, then they have legal right so put things right. (funded by providers who are part of the scheme)FSCS provides safety net if a bank, building society or others fail to pay to the customers their claims. (funded by providers who are part of the scheme)CMA (Competition...) , Citizens Advice and local authority traiding standart offices also have povers but they are more general and don't have specific audience. Importance of regulation banking and finance: Protects consumers from dishonest, incompetent or financially unstable providers. To provide sustainability of the provider and it's shareholders > reducing future crisis. People are more confident in financial system and so in government > encourages them to use financial solutions available. Makes providers not to cheat but work properly. Makes providers to be polite to people and inform them about everything so there are no underwater rock.. The perfect market - market where is a wide range of products, providers, is sold in large quantities and consumer knows their financial position (NWA's and balance), economical position, information about the product, the information is transparent, there is a high interaction with consumers, financial safety and it's all done without hassle. Information failure = when consumer is not fully informed about the product Market failure = when there is no guarantee that free competition and market forces will deliver the best products at the best prices. Even tho regulation is so sweet for consumer, it makes prices higher because providers feel more risk and responsibility what makes consumers t suffer without these products or buy paying more than they feel would be reasonable.

Political Agenda: policies that make sure that you can afford financial services and products. Two key policies - socially included and excluded. Socially included person has an access to social activities, voting, choices, services, facilities and financial products. Socially excluded person is physically or mentally ill, is not educated, live in ghetto, low income, unable to find work or do not work, homeless. Financially illiterate people may also be excluded. Up until 2000 most of the low-income people were not having even basic accounts, they were paid 'cash in hand'. Lots of products and services are available only for those with basic accounts (no benefits). + discounts on utilities to encourage people to have basic accounts. Universal banking policy: banks and building societies were giving people basic accounts regardless of their status. Story: Introducing universal banking policy decreased the amount of people without basic bank accounts to 5% but government wanted to make it as small as possible and even wanted to make a policy that everyone must have basic accounts but they didn't publish it what made banks to work harder on advertisement of there accounts and the percentage reduced even more. although giving away so many basic account from which banks don't get any profit is costly for banks and so they don't advertise them enough. The government encouraged banks to: offer a range of products, provide information accessible and understandable, financially educate people to higher inclusion. Educating programmes made by providers: "Moneysence for schools"- interactive resources online (NatWest) ; Ntionwide Education ; 'Money Skills' (Barclays). To decrease financial exclusion government tries to spread the broadband because some of the products are only available with online banking and benefits too and some people with disabilities or special conditions are able to access their basic accounts easier.

Economic factors

Social factors

This is about cultural aspects, changes in demographics, levels of unemployment and home ownership. Trends of these factors have a big impact on range and type of products, therefore the competition and demand.Cultural issues: About people's ethnic and religious backgrounds, social groups now and then. Cultural trends determine our ideas, beliefs and attitudes in our life generally. These factors affect your approach to financial services and your NWA's. Factors: Multiculturalism, Religion, Youth culture, Grey culture, Consumer culture Multiculturalism: There are lots of people in the UK with origins from other countries. Some of these people may not be able to identify with the traditional ways of doing things in the UK. This means that there is a risk that they will be excluded from using certain financial products and services unless providers will take into account cultural differences when arranging the product. Religion: Some religions are okay with debt as long as you repay (because it may be viewed as stealing money), but others think that borrowing must be avoided at all costs (sharia law). Sharia: forbidden to charge or to pay interest;so borrowing is only from family members or from sharia-complaint; There were banks (IBB,Lloyds, HSBC) which dealed with sharia law but they weren't successful, so it was turned down; Sharia home purchase (Ijara and Murabaha) is when you access to a property without actually borrowing - bank buys property and a person pays off in instalments. Sukuk: sharia-complaint government bonds in UK Islam prohibits drinking alcohol and any sort of gambling, so they can't invest into stock-markets. Youth culture: Teens and early 20's They are financial customers in future. Changes in their attitudes affects how young adults will manage their money and types of products they use. Provides have to keep up with technological trends to help youth culture to keep their finances in order. This culture needs to deal with ageing culture which means they they will need to plan their financial future more carefully to ensure that they will have sufficient income in retirement. Need to be offered an effective financial education, so that they understand how to use budgets and cash flow forecasts. Grey culture: Middle age+ Has higher rate of growth then youth or mature adults culture, so it'll become a target audience for major companies. Major products are pensions, insurance, savings accounts and income-generating investments. They have common values such as respect for tradition and the need for security and trustworthiness. Consumer culture: Definitions: Consumer culture is a form of capitalism in which the economy is focused on the selling of consumer goods and the spending of consumer money. Consumer society is a society in which buying and selling products and services is the most important social and economic activity. 07-08 crisis stopped this culture, but it is coming back recently, which was boosted by low interest rates. Demographics: About what the country contains in terms of age, sex, ethnicity, culture, social status and geography. Definition: Demographics is statistical data relating to the population and particular groups within it. Changes in demographics change marketing of providers because people in one group may have different NWA's from another. Demographics is a tool to determine what financial products would be a solution for certain groups or majority of the population. Age is the most important factor, but others factors suggest surroundings of individuals and their possible NWA's and attitudes at the moment. Growth in population means growth in demand for financial products. Fertility rate is decreasing which means that population size is not stable - too many immigrants which can just move out from the country whenever. = unstable demand Migration, dates and numbers to know - August 2014 UK net migration(into the country) increased to 243k from 175k year before. Migrating to other countries decreased from 317k to 316k that year. Number of migrants actually entered the country increased from 517k to 560k. Demographics have an impact on individuals and their financial factors for sustainable personal financial planning are complex and emerge over a long period of time. Most likely affects of financial planning are increasing feminist companies and smaller families (can afford to spend and care about each child more = increasing demand)

Technological factors

Environmental factors

Legal factors

These are rules that affect providers and consumers no matter what in UK, which relate to discrimination, consumer protection, employment, health and safety.UK legislation: Any business should be regulated by an appropriate regulation, including FSM Act 2000, Consumer Credit Acts 1974 and 2006, Banking Act 2009 and the FSA 2012. Also, businesses must comply with the following legal requirements: Company law (how things are set up and run), Employment legislation (sets rules about how workers must be treated and workers rights), Tax laws (taxes stakeholders must pay, it's calculation too), Proceeds of crime and anti-terrorism legislation (stops money laundering and terrorists from using financial services), Accounting standards (law on how providers must draw up their annual financial statements in according with IAS's) People are protected by FSCS in order to refund money in case of mis-selling or misleading. The amount of conpensation was increased from £50k to £85k in December 2010, but then was decreased to £75k (about 90k euros) this year. page 101 for other legislation that are relevant in the context of financial services. Enterprise and Regulatory Reform Act 2014: On March 2014 Office of Fair Trading and the Compensation Commission responsibilities were closed and their duties were divided between FCA bodies: Compensation and Markets Authority CMA responsible for: investing mergers which could restrict competition, conducting market studies and investigations were there may be competition and consumer problems, investigation where there might be a fall in competition of UK or EU, bringing criminal proceedings against individuals who commit, using consumer protection to ensure that people have choice including individual cases (Unfair Trading Regulations 2008), co-operating with sector regulators and encouraging them to use their competition powers, considering changes in regulation. If any help from regulations fail, you can bring a civil action against a provider. 1980-many regulations were swept away because of the problems occurred. Before this providers were limited in products - banks provided short-term loans, building societies provided long-term loans. Building societies were not allowed to borrow money on the money markets to fund their mortgage loans, they used saving accounts of people instead. Deregulation freed these two types of firm from many legislation that stopped them from competing in similar areas. Many building societies were converted (demutilized) to banks. Today it's a little difference between these two types of firms. Consequences of deregulation: increased competition (good because it helps to keep prices low), building societies converted into banks, before crisis deregulation helped banks to develop poor practices such as aggressive sales techniques and expansions in high-risk investment. Creation of new regulations shows that deregulation was damaging, this is why providers should be regulated properly. EU legislation: EU laws affect all the countries within it. Regulations are laws which are directly applicable in EU counties and businesses must apply them immediately. Directives are instructions issued by European Commission to the governments of the EU members and businesses have some time to fit their policies to support and achieve these goals. Lots of UK laws were taken from EU (Data protection Act 1998 and Consumer Credit Act 2006). Financial services are affected by EU laws because EU is trying to harmonise financial services regulation to safeguard the rights of individual consumers of financial services services. They do it to create a single European market for financial services where people fill be able to confidently buy products and services from a provider in another EU country. European Commission plans to bring lots of laws and directives that deal with people who want to deal with international businesses across the UK. This should increase competitive pressure as there will be more offshoring.

Questions

Political factors:Economic Factors:Social factors:Technological factors:Environmental factors: