Financial Inclusion Needs Work in U.S.

For as much as “inclusion” is a buzzword in Corporate America and other realms, this country still has some work to do when it comes to financial inclusion.

The second annual Global Financial Inclusion Index compiled by the Centre for Economics and Business Research and Principal Financial Group indicates the U.S. ranks fourth out of 42 evaluated markets in terms of financial inclusion. That’s after placing second last year. Singapore took the top spot, followed by Hong Kong and Singapore.

Hope isn’t lost in the U.S. This country’s 2023 slide in the Global Financial Inclusion Index was modest and looks good compared to some other large, mature economies, particularly those in Europe.

“Broadly speaking, Europe’s largest, oldest economies fell into the category of mature, backward-looking economies and Southeast Asian economies, by contrast, fell into the category of young, forward-looking economies,” notes Seema Shah, chief global strategist for Principal Asset Management. “In this year’s data, we see a widening gulf between the two, with levels of financial inclusion in large developed markets stagnating or even deteriorating. Those that have built their financial systems from the ground up with technology at their foundation are now making leaps forward.”

Sentiment Declining in the U.S.

In terms of financial inclusion issues for advisors to be aware when engaging with clients, the Global Financial Inclusion Index lays bear some important points regarding the current state of affairs in the U.S.

Underscoring the fractious political climate in this country, just half of those surveyed believe the U.S. government is acting in a way to make them feel financially included. Two-thirds say the same about domestic financial systems and 72% agree their employers accomplish that goal, but in both cases, those are double-digit declines from last year’s percentages. Advisors should note the situation is worse with women.

“Meanwhile, women are 12% less likely than men to report feeling financially included in the U.S., with sentiment holding true across all three pillars,” according to the survey. “Women feel less financially included across all 25 different measures of financial inclusion surveyed. The percentage point gap between men and women who feel financially included is double digits on 23 of the 25 measures. The five largest gaps include the following.”

Underscoring the need for advisors to better connect with female clients is the fact that just 39% believe they have access to high-quality investment products, but 62% of men feel the same.

Technology Helps Inclusivity

One way advisors can help clients, particularly those in younger demographics, is to leverage technology. At the very least with millennial and Gen Z clients, meet them halfway on technology because it’s a critical component to their views of inclusion.

“Multiple studies have shown the evolution of fintech has been critical to accelerating financial inclusion across the world, especially in developing markets,” concludes Principal. “Advancements in digital finance have been essential to expanding access to banking products, enabling more people to save, borrow, and invest.”

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