The advice gap shows no sign of shrinking in the UK and the everyday consumer is increasingly drifting away from the financial services sector.
IFA network Openwork’s nationwide study of just over 1,000 adults found more than two-in-five (43%) do not know how to access financial advice.
Of those, 62% were women.
To get a better understanding of why Brits are struggling to understand the benefits of financial advice and are unsure of how to access it when they need it, International Adviser reached out to industry experts to get some insight.
A global challenge
Paul Stanfield, chief executive of the Federation of European International Financial Advisers (Feifa), said: “This research not only confirms what we all know – namely that there is a significant advice gap – but also reinforces what many have believed for some time.
“A significant proportion of the populace understands the value of professional advice, or could do, but does not know how to easily access it.”
Keith Richards, chief executive of the Personal Finance Society, told IA: “Access and the lack of engagement with financial advice is a global challenge, which must be addressed by policymakers and the profession, collectively.
“It is vital we help people fully understand the financial planning options they have to address their needs and objectives.
“Unfortunately, engagement with financial advice is often hindered by several factors, based fundamentally on a lack of trust in the wider industry and understanding of the value of our profession’s services.”
Robo-advice
Despite claims that technology can help people with their financial decisions, the research found people prefer face-to-face advice, which coincided with a recent story IA published on the value of customer care.
Around 71% said they are concerned that so-called robo-advice may not be entirely appropriate for their specific needs, while nearly three-in-four (73%) said they would rather speak to a financial adviser.
As banks continue to close their high street branches, the issue of access to advice is set to grow and the research revealed a real need for financial advisers.
“The advent of the internet should have allowed greater access to financial advice for those who need it,” Jason Porter, director of Blevins Franks Financial Management, said. “But, the robo-advice domination of this market deters many who do not believe ‘one-size-fits-all’.
“Introducing education at secondary school level of basic finances and the UK financial system might help the individual realise where do-it-yourself and robo-advice comes to an end, and face-to-face advice takes over.”
Porter also flagged the lack of financial education provided in UK schools, which means “many people do not have a fundamental understanding of basic finances and the financial system in the UK”.
“This perhaps might explain why millions do not know where to go for advice when they require it.”
Generational divide
Neil Jones, wealth and tax planning specialist at Canada Life, said: “We may be seeing something of a generational divide when it comes to how people want to get financial advice.
“Many people – including I suspect a majority of people – would want a face-to-face meeting on retirement to be sure their life’s financial work is in good hands.
“Compare that with an up-and-coming, always-on generation which is comfortable with electronic meetings or robo-advice, and have something of a DIY approach to online research.”
Preparing for retirement
The Openwork survey also showed the number of people not even looking towards the future.
Around one-in-four (26%) said they had not started saving for retirement, while more than two-in-five (42%) said they won’t start until they are aged 55-plus.
Some 20% have a target date for retirement and just 32% believe they will be able to retire by that date.
“While professional financial advice is not for everyone, there remains a large part of the population that would benefit from it, but don’t think they have enough money to justify it,” Sarah Waring, client and proposition director at Quilter Private Client Advisers, told IA. “There is no better example of this than in the retirement sector.
“The Financial Conduct Authority’s Retirement Outcomes Review showed that customers at retirement age are now making better and more informed choices thanks to advice, regardless of the scale of a customer’s retirement savings.”
Fail to engage
David Stevens, life advice director at insurer LV, also told IA: “The research continues to identify many more people that need help to cut through the confusion and headache in forming financial plans that work for them.
“The advice industry has much work to do if it is going to really modernise its services to make them truly affordable and convenient to a much larger audience.
“Otherwise, we will simply continue to fail to engage the many who don’t see help in the form of financial advice as ‘for them’ and continue to miss out on the value it can bring.”
What the sector needs to do?
The survey highlighted areas where the financial advice sector needs to improve.
From increasing the numbers of advisers to educating consumers, it needs to tackle the ever-growing advice gap.
The Personal Finance Society’s Richards added: “I believe that the profession has a unique opportunity to address the current advice-gap and facilitate the introduction of a new level of consumer-centric simplified and lower cost advice, together with simplification of terminology and language.
“It is essential that we secure the public’s confidence and trust as an integral part of the continuing development of a more vibrant financial services sector and must work with the regulatory authorities to achieve this.
“It is time for the profession to unite and influence the future direction of travel.”
