Doubts over value of advice behind sluggish engagement

By Hope William-Smith

Oct 04, 2018

Only one in seven of the 90 per cent of adults in the UK who did not seek financial advice in the past year chose not to because of high costs, new research shows.

Interim report findings from consultancy firms Ignition House and Critical Research to inform the Financial Advice Market Review show consumers continue to have concerns around transparency, suitability and value of advice.

Consumers are also gaining their own confidence in managing their money.

Of those surveyed who did not receive advice in the past 12 months, 37 per cent felt able to decide what to do with their own money up 9 per cent from last year.

A total of 4.5 million people –  around one in 10 adults in the UK –  received financial advice over the past 12 months. This is up from 3.2 million in 2017.

Aegon pensions director Steven Cameron says that while the engagement increase is positive, FCA figures that show 18.2 million people with savings or investments of more than £10,000 who might need advice but have not taken it remains concerning.

He says: “The financial services industry needs to continue to focus on ensuring individuals have access to the support and financial advice they need throughout their lives. Today more than ever, individuals are left to take personal responsibility for their financial futures.”

In the interim report, only 15 per cent of respondents who did not seek advice in the past year say affordability is the issue.

The figure also includes those who did not want to pay advice fees, feeling cost versus worth was not high enough.

Lack of trust in advisers accounts for one in eight not receiving advice, while one in 10 expressed concerns over quality of advice were they to take it up.

The most common reason was found to be simple lack of need. Half of respondents say they did not need an adviser in the past year, the same percentage as in 2017.

For those that have had advice in the past 12 months, the study finds 79 per cent paid for their most recent advice session.

In closer detail, 36 per cent paid through the product provider, 28 per cent paid as part of an ongoing charge, and 16 per cent paid a one-off fee.

One in six (16 per cent) say they did not pay a fee because payment was dependent on taking out an investment or pension product, which they did not do. Five per cent say they are unsure how they paid for their advice, but did.

Commenting on the findings, the FCA says it is positive to see awareness has increased around automated services for both pensions and investments but notes little use has been made of them.

In its own accompanying research, the watchdog says the number of adviser staff at firms currently sits at 26,311 which represents a 3 per cent increase from 2016 and is a positive for the industry.

A full review of FAMR baseline indicators is expected to be carried out next year, along with the final post-implementation review of RDR. The FCA says results from this will be finalised for publishing in early 2020.

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