Mintel’s research shows that a much larger proportion of adults have an identifiable financial advice need than have sought advice in the past. As we might expect, readiness to pay for advice increases with household income and personal wealth. However, somewhat counterintuitively, it decreases with age. While 60% of under-35s are prepared to pay for advice, the proportion falls to 36% among over-55s. Younger consumers are not only more willing to pay for the services of an expert, but they are also more likely to be interested in obtaining advice, including online. This is a positive finding, given how the pandemic is changing the way many advice firms conduct business.

The global health crisis has affected individual firms and sectors in different ways and to varying degrees, and there have been some casualties. Yet despite the UK entering into a third national lockdown in January 2021 and a prolonged period of uncertainty, most firms are holding up – albeit, in many cases, with government support to counter reduced income. Furthermore, there is a certain amount of optimism about the industry’s longer-term prospects, with many expecting a surge in new client enquiries once the worst of the crisis is over and as the economy recovers.

Perhaps the biggest challenge for the industry going forward is narrowing, and ultimately closing, the advice gap. Until this is addressed, the retail advice market will fail to achieve its full potential. Research continues to show that many people do not know where to go for professional advice. In addition to this, Mintel’s latest consumer survey reveals considerable latent demand.

This is where technology can be a useful enabler. Prior to the coronavirus outbreak, the market was steadily moving towards digital and remote channels of communication and client engagement, particularly in the insurance and mortgage sectors. However, the pandemic has accelerated this digital shift, bringing fresh opportunities with it – among them, the ability for firms to reach a wider geographical audience and generate efficiencies. In addition, there is ample scope to grow the online/automated advice market. This is, though, providing firms can convince enough people that they offer a secure, as well as convenient and cost-effective, service.

Key issues covered in this Report

  • The impact of COVID-19 on the financial advice market.

  • How the market is evolving and adapting to new technological innovation, within an evolving regulatory framework.

  • How and why people seek financial advice.

  • Consumer willingness to pay for advice.

  • Preferred advice channels and interest in online advisers/advice platforms.

COVID-19: Market context

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases the following month. As the case level rose, the government ordered the closure of non-essential stores on 20 March. 

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. It was not until 15 June that non-essential stores were allowed to reopen, followed by pubs, restaurants, hotels and hairdressers on 4 July, and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a month-long lockdown from 5 November and Scotland introducing a new five-level system of coronavirus restrictions. 

However, despite these restrictions, case numbers continued to increase. All four UK nations tightened restrictions in January 2021, effectively leading to a third full UK-wide lockdown. On 22 February 2021, the UK government set out its roadmap for easing restrictions in England, prioritising the opening of schools for all children in England from 8 March. Wales, Scotland and Northern Ireland are taking their own slightly more cautious approaches, but are similarly prioritising the reopening of schools. In England there will be a four-step approach comprising:

  • Step one, on 8 March schools will reopen and two people allowed to meet outdoors socially and from 29 March, outdoor gatherings of either six people or two households will be allowed and outdoor sports can resume

  • Step two sees shops, hairdressers, gyms, zoos and theme parks reopen from 12 April and outdoor hospitality resume

  • Step three is planned to start on 17 May, with most social contact rules lifted, as well as limited mixing indoors

  • Step four, it is hoped that, from 21 June, all legal limits on social contact will end.

The UK’s vaccination programme started on 8 December 2020, and with both the Pfizer-BioNTech and the Oxford-AstraZeneca vaccines licensed for use in the UK, the government achieved its target of vaccinating 15 million people, including the most vulnerable, by mid-February. It is now envisaged that all adults will have had their first jab by the end of July 2021. While concerns remain over the efficacy of existing vaccines to new strains of the virus and the disparity in vaccine availability across the globe, there are, at least within these shores, finally some reasons for optimism.

Report coverage and definitions

This Report examines the market for professional financial advice in the UK. Advice is distinct from ‘guidance’. According to the FCA (Financial Conduct Authority), definitions are as follows:

Advice – a service that recommends a specific product or course of action based on an individual’s particular circumstances and financial goals. Advice is provided by qualified and regulated individuals or online by a regulated organisation. Providers of advice are responsible and liable for the accuracy, quality and suitability of the recommendation that they make and you are protected by law. There is usually a fee for this service.

Guidance – an impartial service that helps people to identify their options and narrow down their choices (eg via making suggestions), without telling them what to do or which product to buy. Providers of guidance are responsible for the accuracy and quality of the information they provide, but not for any decision made that is based on it. Guidance is free unless the provider clearly states otherwise.

In the retail investment market, there are two main types of regulated adviser:

  • independent advisers offer advice on a wide range of financial products and providers across the market, and will give unbiased and unrestricted advice; they may also be referred to as IFAs (independent financial advisers)

  • restricted advisers offer advice on a limited selection of products and/or providers.

Other definitions of terms used in this Report:

Automated advice – a term used by the FCA to describe retail investment advice provided exclusively through automated channels, where customers do not interact with human financial advisers. The advice is typically given on a one-off basis. The term may be used interchangeably with ‘robo advice’ (see below).

Digital IFA – a digital platform offering consumers access to regulated, personalised and independent financial advice. This is a very new market in the UK, and one that is still evolving.

Robo advice – refers to automated, direct-to-consumer advice and guidance, with investment recommendations generated by algorithms. Although there are various incarnations of robo adviser, they broadly fall into two categories:

  • fully automated (or ‘robotic’) guidance service

  • hybrid model, combining automation with some human assistance to provide a more personalised advice service.

Simplified advice – refers to advice with a personal recommendation, which is limited to one or more of a customer’s specific needs and does not involve analysis of the customer’s circumstances that are not directly relevant to those needs.

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