Last month the Financial Services Compensation Scheme issued a report detailing some interesting consumer research they conducted to gauge the public’s attitudes towards financial advice.
Some findings were predictable but others a bit of a surprise, in some instances telling a different story from other research I have seen.
A mixed picture for advice seekers
I was struck by the apparent fact that a large number of individuals have not sought financial advice in the past five years. Averaging across all age groups and genders, a little over a third (36 per cent) of those surveyed who had savings, investments or a mortgage had looked for help with their finances in that timeframe.
I found this surprising, given the market volatility, increasing inflation and interest rates.
Interestingly, the largest cohort (54 per cent) were aged 25-34, and the FSCS queries this outlier as possibly being explainable by younger people being confused about the definition of advice, taking more unregulated advice and guidance that wouldn’t be protected by the FSCS.
Delving into where the young are finding recommendations on where to put their money – turning to social media, online influencers, a guy down the pub, ie 'people like me' – is for another day.
As my colleague Andrew Storey pointed out when we discussed the FSCS research, it’s unexpected to see that having previously paid for regulated advice, only 62 per cent would use the same advice service again for a similar purpose. This is at odds with other surveys and suggests some increased dissatisfaction among the advised.
Whether this is cost-related or for other reasons is unclear right now.
OpenMoney’s report in 2021 suggested more than 9 in 10 individuals found it helpful, so it's surprising only 62 per cent would use the same advice service again.
Price models could succumb to demographics
Of more immediate concern to advice firms is the continuing view from many that the current avenues for individuals to access regulated advice are too expensive (22 per cent), or they believe they haven’t got enough assets to interest an adviser (23 per cent), or they are not confident the adviser can offer value for money (14 per cent).
While it’s no shock to learn that advice offerings are currently considered by a large swath of the public to be uneconomical, it does pose questions about the long-term sustainability of many traditional advice businesses.
When the next generation of potential clients replaces those currently nearing or in retirement, and lack the advantages of significant housing wealth or big defined benefit pension pots, firms keeping to the existing price paradigm may struggle to onboard enough clients.
If I may be direct here, millennials and generation Z are advisers’ future sources of income, so it’s vital to get them into the firm’s ecosystem before long.
