You don’t often hear ‘career highlight’ and ‘financial crisis’ in the same sentence. But for Sir Hector Sants, the challenge of navigating through a storm is what motivates him. “The financial crisis of 2007–2008 was a career highlight for me in the sense that I was engaged in an activity of real importance, an event that had never happened before. It was highly challenging and the consequences of the decisions I was making at that time were far-reaching. It was a searing experience, from which I learnt much both professionally and personally," Sir Hector says.
He joined the then regulator, the Financial Services Authority (FSA), in 2004 as managing director responsible for wholesale and institutional markets. This followed a long career in the private sector, listing stockbroking partnership Phillips & Drew, the Union Bank of Switzerland and investment bank Donaldson, Lufkin & Jenrette (see boxout for full CV) among his employers. He was appointed CEO of the FSA in 2007, just as the world plunged into The Great Recession.
A change in direction
Sir Hector's CV
2018: Chair, Money and Pensions Service
2015: Partner, Oliver Wyman
2013: Head of compliance, Barclays
2007: CEO, Financial Services Authority
2004: Managing director for wholesale and institutional markets, Financial Services Authority
2000: Vice chair/CEO, EMEA Credit Suisse
1997: Head of international equities, Donaldson, Lufkin & Jenrette
1990: Head of equities, Union Bank of Switzerland Ltd
1984: Partner, Phillips & Drew
1977: Trainee analyst, Phillips & Drew
Sir Hector always had a change of direction on the horizon, even when starting his first job in the City in 1977. “I said to myself that I want to do something different at 50 years old”. He stayed true to his word and turned his hand to the regulatory side of the sector. “It’s good to use the experiences that you’ve gained throughout your personal and professional life and give something back. You should ground this in an area where you have genuine expertise and experience you can draw on,” he says.
In 1974 he graduated from Corpus Christi College, Oxford, with a degree in psychology and philosophy, and has transferred the knowledge he gained into practical business use. “When combating any problem in financial services, I've always tried to combine both a statistical and fact-based analysis of any given problem with a psychological understanding of what it means to people and how they are likely to react to any given set of events. Economics is as much a behavioural science as it is a hard science, and that has always been one of the attractions for me of what I do.”
By joining the FSA, Sir Hector decided he could give back to the financial sector and make an impact on society through drawing on his experience. “I've always strongly believed that specialism is good, because what you learn is invaluable. And there is no substitute for learning in the field,” he says.
Carrying experience forward
MaPS was set up by the UK government and launched in January 2019, bringing together three respected financial guidance bodies: the Money Advice Service, The Pensions Advisory Service and Pension Wise to form what was initially known as the Single Financial Guidance Body, and renamed MaPS in April 2019. Its vision is ‘everyone making the most of their money and pensions’ through its five core functions: pensions guidance; debt advice; money guidance; consumer protection; and strategy. Sir Hector was appointed chair of the body in 2018 and brought a wealth of experience from the FSA with him.
"Economics is as much a behavioural science as it is a hard science"
“I think I'd certainly see my time at the FSA, and indeed at MaPS, as contributing towards a fair and efficient financial system that works for the common good and for everybody. That’s what I think the goal of a regulator is, to contribute to achieving that. And MaPS is as well,” he says.
To achieve a fair system, he says, you need a three-pronged approach. “You have to have the right regulation, the right corporate culture, but you also need empowered, knowledgeable and capable consumers who have the right relationship with money.” One of the reasons why he was so keen to take on the role at MaPS was to provide that missing third prong in the positive evolution of the financial services ecosystem.
Making the right decisions
MaPS aims to equip the individual with the right knowledge to make the right decisions. Its approach, detailed in its UK strategy for financial wellbeing, includes plans to embed financial education in schools and further education in homes and in the wider community. The strategy reports that 48% (4.8 million children and young people) said yes to one or both of these statements:
- They recall financial education at school they considered useful.
- Their parents gave them regular money, set rules about money and gave them responsibility for spending decisions.
Sir Hector on purpose and profit
"I think that purpose and profit can be aligned. I am strongly of the view that organisations that prosper and appropriately reward their shareholders over the longer term are organisations that are underpinned by a strong sense of community-driven purpose.
We would argue very strongly that we would like to see financial services firms having, at the core of their purpose, the notion of building individual financial wellbeing. Building this over the long term is somewhat different from treating your customers fairly at the point of sale. I think those firms that have a purpose to build financial wellbeing will prosper more over the longer term than those purely focusing on short-term customer need."The strategy says that MaPS aims to increase this figure to 6.8 million children and young people by 2030. "You need to be technically equipped to ask the right questions and make the right judgements, which is a question of being financially educated. This means during school and further education, and continuing to adulthood," he says.
"Our objective is to help you make the most of whatever you’ve got, however much that might be. And making the most means that you manage it in a sensible, thoughtful and considered way, which enables you to hopefully maintain an appropriate lifestyle now and save for the future in a way that enables you to live how you wish to."
People need the right information to make judgements about managing their finances. "That information primarily comes from the financial services sector, but also government bodies, such as MaPS," he says.
There are potential toolkits that need to be developed to facilitate the distribution of information, such as a pensions dashboard. MaPS is building an infrastructure to power a pensions dashboard to enable individuals to access all their pensions information online, securely and in one place, thereby supporting better planning for retirement and growing financial wellbeing. "Saving and pensions are a key element of feeling empowered and confident, and knowing what's going on," explains Sir Hector. MaPS is committed to producing a timetable outlining the rollout by the end of 2020.
In its regular adult survey, MaPS measures the percentage of working-age 'struggling' and 'squeezed' people who say they save every month or most months. In its strategy, 57% (14.7 million people) say they do this. Its national goal is to increase this figure to 16.7 million people by 2030. This part of its strategy is titled 'Nation of savers'. MaPS defines 'struggling' as people who find it difficult to keep up with bills/payments and to create a savings buffer, and 'squeezed' as working-age consumers with significant financial commitments, but little provision for protecting income shocks.
According to the MaPS strategy document, under the 'Future focus' agenda, "behavioural bias research shows that people live for today" and "they find it hard to make trade-offs between spending now, saving for the short term, having safety-net savings and planning for later life". Sir Hector says: "The right behavioural attitude is as challenging an issue to address as the other two, and it's really somewhat underappreciated."
He explains that our current engagement with money is event-driven, meaning it's quite immediate and reactional, and would benefit from a more considered approach. For example, "By maintaining our physical health, we can minimise the risk of falling ill in the future, rather than just going to the doctor when we feel ill. It would be far better if we could move to a place where we had a much more anticipated relationship with money. We want to change people's relationship with money from being transactional to something that they think about as part of their everyday lives."
"It's never too early to save for the long term, and it's never too late to save for the short term"
Another point made in the 'Future focus' section is the boost of individual savings to the wider economy. It says: "Private pension wealth identified [in ONS Wealth in Great Britain wave 5: 2014 to 2016 survey] was £5.4tn, or 42% of the then household wealth of the UK. Of that pension wealth, 69% was invested in the UK and 31% abroad. So, even a small change in future focus could add hundreds of billions to wealth invested in economically productive assets across the UK. And as people spend sustainably in their retirement, this is positive for them and the community in which they live."
A culture change
The MaPS strategy document says that 11.5 million people have less than £100 in savings and 9 million people often borrow to buy food or pay bills. But this was before Covid-19, notes Sir Hector, and the situation is likely to get worse.
Sir Hector on advice for young professionals
"It's important that whatever you do is something you get personal satisfaction out of and you'll have a high level of personal motivation. Doing things just for money is a bad idea, which in the financial sector in the past, I'm used to seeing.
The other point that has certainly been brought home to me over the years is the importance of maintaining balance in your life."
He says that a lack of savings, and therefore financial resilience, puts people at risk of falling into significant financial and personal distress, with knock-on effects on mental health. "Having £500 to £1,000 of savings can transform the quality of your life. Saving a little bit is very worthwhile". He also highlights the importance of saving enough money to comfortably retire, and recommends planning for this at an early stage. "It's never too early to save for the long term, and it's never too late to save for the short term," he says.
To get more people saving, whether that's in their bank account or for retirement, a key point of MaPS’ strategy is to make financial information easy to use and to understand for everyone, using transparent and simple language.
Financial wellbeing and mental health
The Money and Mental Health Policy Institute reported in 2019 that 46% of people in problem debt also have a mental health problem, and in a survey mentioned in the report, of nearly 5,500 respondents, 86% say that their financial situation has made their mental health problems worse.
MaPS' financial wellbeing strategy emphasises this important connection, noting the effect that being over-indebted has on an individual's mental health and overall wellbeing. Its figures show that 5.3 million adults in the UK need debt advice, with the younger population (18–34) more likely to be struggling with mental health. It reports 51% of the younger population group have had mental health problems within the past three years.
"If you fall into debt, that is one of the key drivers of mental health issues. It's almost a circular issue, it's sometimes difficult to disentangle the degree to which you had some mental health issues and then you fell into debt, or you were in debt and then had mental health issues," Sir Hector says. "One of our goals, therefore, is to build a link between the health sector and the debt advice sector. One of MaPS' initiatives, which I'm particularly proud of, is that we have significantly increased our connectivity with the NHS. Given everything else the NHS is currently facing, I've been very impressed by its willingness to engage with us on this issue."
Covid-19 operational challenges
Financial wellbeing and financial resilience have never been more important amid the Covid-19 landscape. "It certainly underscores the importance of what we do, but I do think also, perhaps specifically for MaPS, it is clearly an operational challenge," he explains. In the short term, the impact of Covid-19 and the related economic shock will see an increase in the number of people who need financial help over the next 12–18 months, believes Sir Hector, who says that MaPS needs to commit resources and expand the amount of help that's available, particularly in the debt advice sector.
Reflecting on more than 40 years in the financial services sector, Sir Hector shares some advice that has helped him in every role he's had to date. "Whenever you seek to come up with a solution, you need to recognise everybody sees the world differently, through their own set of experiences. And it's very easy to forget that."
"Also," he adds, "it is important to know what your values are and stick with them. Particularly when you're making decisions in very difficult, challenging and uncharted waters. You need to ground those decisions in values that you're happy to defend."