Almost two-thirds of UK adults with savings, investments or a mortgage have not sought regulated financial advice in the last five years, the Financial Services Compensation Scheme (FSCS) has found.
The UK lifeboat scheme surveyed 2,000 adults and found more than one-in-five of those who obtained free guidance rather than regulated advice said they did so because they believed the service was “too expensive”.
More than half (55%) of those with any financial products think that “paying for financial advice is for the wealthy”.
Young people between the ages of 18 and 34 were most likely to agree that it should be easy to invest without needing professional financial advice. More than half of UK millennials (60%) and Gen-Z (57%) with financial products agree they can find good financial advice online, and almost half (44%) of Gen-Z believe they can source good financial advice on social media.
Fraudsters
With investments, pensions and cryptocurrency scams on the rise, as fraudsters seek to take advantage of the cost-of-living crisis, FSCS’ research suggests there is a greater need for consumers to understand the difference between regulated advice and guidance, and what to expect from each.
Not seeking regulated advice, or following guidance from unregulated and unsuitable sources, could put UK adults at higher risk of putting their money somewhere that isn’t safe.
The FSCS said it is a “pertinent issue” as consumers may only be eligible for compensation for poor financial advice if they are dealing with a firm that is authorised by the Financial Conduct Authority (FCA).
But the survey did find that among UK adults that have taken paid for regulated financial advice, 62% said that if they needed financial advice for a similar reason, they would use the same service from the provider they used before.
Risk
Caroline Rainbird, chief executive of FSCS, said: “The financial ‘advice gap’ is a concern for FSCS, particularly as scammers will prey on peoples’ fears and exploit any gaps in their financial knowledge, putting them at greater risk of making poor decisions about their money.
“Our latest research shows that consumers are looking for easy ways to invest, whilst also getting the right support. The FCA’s Consumer Investments Strategy looks to make advice on mainstream investments more accessible and affordable to everyone, which is something we welcome.”
“At the FSCS, we see the impact of poor advice every day. It results in millions of pounds each year disappearing from consumers’ pockets. We can only offer protection on financial products and services that are regulated, and we encourage consumers to check if they are likely to have access to FSCS protection if something goes wrong.
“It is important for people to be fully aware and confident about the decisions they are making with their money and the risks that come with taking guidance from unauthorised sources.”
