The financial planning community has long catered to the wealthiest in our society, often neglecting those with the greatest need for planning. The underserved regions and populations, while not necessarily poor, frequently find themselves unable to make ends meet. This demographic does not require investment advice but rather guidance on achieving a frugal yet decent standard of living. To address this need, we must pivot our focus towards delivering “universal economic empowerment“, ensuring that all individuals can meet their basic needs with dignity.
Understanding the Underserved
The common characteristic among the underserved is their struggle to balance income with essential expenditures. These individuals often fall below the “empowerment line”, a concept introduced by the McKinsey Global Institute. The empowerment line represents the expenditure required for an individual to afford a basket of essential goods and services, allowing for a frugal but decent living standard. It includes nutritious food, housing, energy, safe water, transportation, healthcare, education, clothing, and communication, with a small margin for recreation and savings to prevent falling back into poverty.
The Focus on Affordability
Boosting incomes is a vital component of economic empowerment, but it must be complemented by reducing the costs of essential goods and services. High costs for basic necessities have made it increasingly difficult for millions to get ahead, particularly in the wake of post-pandemic inflation. Addressing these cost issues can significantly enhance living standards for the underserved.
McKinsey’s research highlights that in wealthier countries, the cost of essentials tends to rise in tandem with GDP per capita, often outpacing income gains for the bottom 20 percent of the population. This pattern underscores the need for financial planners to focus on affordability as a critical factor in economic empowerment.
A New Paradigm for Financial Planning
To serve the underserved effectively, we must develop and expand low-cost business models that deliver relevant financial planning at an affordable rate. This approach involves passing on productivity-driven savings to users and ensuring that our services are accessible to all, regardless of income level. Affordable propositions can be delivered directly or through workplaces, where empowered employees are more productive and loyal, yielding substantial benefits for businesses.
Reducing Income and Wealth Inequality
By focusing on both boosting incomes and lowering costs, we can address income and wealth inequality more effectively. Ensuring that everyone can meet their basic expenditure needs will reduce the stress and financial insecurity faced by many households. This strategy includes:
- Nutritious Food: Making healthy food accessible and affordable.
- Housing: Addressing the high cost of housing, particularly in urban areas.
- Energy: Ensuring affordable and reliable energy sources.
- Safe Water: Providing clean and safe water for all.
- Transportation: Offering affordable and efficient transportation options.
- Healthcare: Making healthcare services accessible and affordable.
- Education: Ensuring access to quality education for all.
- Clothing and Communication: Providing affordable options for clothing and communication needs.
The Role of Financial Planners
Financial planners have a pivotal role in this transformation. By shifting our focus from catering to the wealthy to empowering the underserved, we can make a profound impact on society. This involves developing financial models that prioritise affordability and relevance to the needs of the underserved communities. Our profession should be dedicated to reducing inequality and fostering economic inclusion, ensuring that everyone can enjoy a decent standard of living.
Conclusion
The financial planning profession must evolve to meet the needs of those who are underserved. By delivering affordable financial planning and focusing on universal economic empowerment, we can help millions achieve a frugal but decent standard of living. This shift will not only reduce income and wealth inequality but also create a more inclusive and resilient economy. It is time to deliver the right services to the right people and ensure that economic empowerment is within everyone’s reach. Let us commit to this transformative journey and make a lasting impact on the lives of the underserved.
By focusing on delivering affordable, relevant financial planning to the underserved, we can help build a world where everyone has the opportunity to thrive. This is the mission that should define our profession in the years to come. Let’s start delivering universal economic empowerment today.
Q&A on Delivering Universal Economic Empowerment
Q1: What is the main argument of the article?
A1: The main argument is that the financial planning community should shift its focus from catering primarily to the wealthy to addressing the needs of underserved populations. These populations, although not poor, struggle to make ends meet and would benefit more from affordable financial planning services aimed at achieving a frugal but decent standard of living.
Q2: Who are the underserved populations mentioned in the article?
A2: The underserved populations are those who are not classified as poor but are still unable to make ends meet. They fall below the “empowerment line,” meaning they struggle to afford essential goods and services necessary for a decent standard of living.
Q3: What is the empowerment line, and why is it important?
A3: The empowerment line is a threshold that represents the expenditure required for individuals to afford a basket of essential goods and services, ensuring a frugal but decent living standard. It includes necessities such as nutritious food, housing, energy, safe water, transportation, healthcare, education, clothing, and communication. It is important because it highlights the gap between income and the actual cost of living, especially for underserved populations.
Q4: Why is affordability emphasised in the article?
A4: Affordability is emphasised because high costs for essential goods and services have made it difficult for many people to achieve a decent standard of living. By focusing on making these necessities more affordable, financial planners can help underserved populations improve their economic situation, thus promoting greater financial inclusion and reducing inequality.
Q5: How can financial planners help reduce income and wealth inequality?
A5: Financial planners can help reduce income and wealth inequality by developing low-cost business models that pass on productivity-driven savings to users. They should focus on providing affordable financial planning services that help individuals meet their basic needs, save money, and avoid falling back into poverty.
Q6: What are some key areas where costs need to be lowered to achieve economic empowerment?
A6: Key areas where costs need to be lowered include:
- Nutritious food
- Housing
- Energy
- Safe water
- Transportation
- Healthcare
- Education
- Clothing and communication
Lowering costs in these areas can significantly improve living standards for underserved populations.
Q7: What role do financial planners play in the transformation towards universal economic empowerment?
A7: Financial planners play a crucial role by shifting their focus to underserved populations, developing affordable and relevant financial planning models, and advocating for policies and practices that reduce the costs of essential goods and services. Their efforts can help ensure that everyone has access to a frugal but decent standard of living.
Q8: What are the benefits of focusing on the underserved populations for businesses and society?
A8: Focusing on underserved populations benefits businesses by creating a more productive and loyal workforce, expanding market opportunities, and enhancing corporate reputation. For society, it reduces income and wealth inequality, fosters economic inclusion, and helps build a more resilient and inclusive economy.
Q9: What is the call to action for the financial planning profession in the article?
A9: The call to action is for the financial planning profession to prioritise serving underserved populations with affordable financial planning services. By doing so, financial planners can help reduce inequality, improve economic inclusion, and ensure that everyone can achieve a decent standard of living.
Q10: How can financial planners deliver affordable financial planning services?
A10: Financial planners can deliver affordable services by developing low-cost business models, leveraging technology to reduce costs, passing on productivity-driven savings to users, and creating financial plans that are tailored to the specific needs and circumstances of underserved populations.
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