Table of Contents
Executive Summary
-
- Economic and market conditions
- Regulatory changes
- Pension freedoms push more consumers towards online sources of information
- Rising regulatory costs may hamper hopes of innovation
- The financial advice market
- The number of financial advisers and advisory firms stays steady in 2014
-
- Figure 1: Number of advisers in the market, 2011-14
- Non-advised sales on the rise
- The consumer
- Banks and building societies are the most popular sources of advice for consumers
-
- Figure 2: Financial advice usage, February 2015
- Consumers who have used paid professional financial advice display the highest levels of satisfaction with the service
-
- Figure 3: level of satisfaction with service, February 2015
- 62% of people expect to need financial advice in the future
- 48% of 25-34-year-olds expect to need advice on mortgages…
- …while 26% of people over 45 expect to seek pension/retirement planning advice in the future
- People who have sought professional advice in the past are more likely to do so again in the future
-
- Figure 4: Future financial advice needs, February 2015
- Younger people are more likely to require advice in more areas
-
- Figure 5: Number of types of future financial advice needs by age
- Consumers prefer the transparency of fixed fees
- Online could reduce the cost barrier which keeps many at bay
-
- Figure 6: Financial advice payment preference, February 2015
- The industry must work hard to build trust among those on the fence
-
- Figure 7: Attitudes towards financial advice services, February 2015
- What we think
Issues and Insights
-
- The advice market shifts towards advice and solutions, and away from products and sales
- The facts
- The implications
- Changes in the market amplify the advice gap
- The facts
- The implications
- Online tools can help lower the risk of consumer alienation with financial service companies
- The facts
- The implications
The Market – What You Need to Know
-
- Average total weekly earnings growth has started to outpace inflation
- Savings ratios remain steady in 2014
- Low interest rates continue to push people towards equity-based investments
Economic Environment
-
- Greater potential to save as average weekly earnings begin to outpace inflation
-
- Figure 8: monthly change in rpi and average weekly earnings (regular pay, excluding bonuses), January 2009-January 2015
- However, savings ratio remains steady in 2014
-
- Figure 9: Quarterly change in UK GDP and household savings ratio, 2004-14
- Consumer financial confidence improves at the start of 2015
-
- Figure 10: Financial Confidence Index, January 2009-15
Regulatory Environment
-
- The FCA outlines plans to increase advisor costs by 10% for 2015/16
- Consumer demand shifts towards non-personalised sales channels
- Changes in the pensions and mortgage markets elevate the need for advice
Companies and Brands – What You Need to Know
-
- Providers are split on the benefits of consolidation
- Concerns over product providers offering restricted advice
- Government and third-sector bodies attempt to narrow the advice gap
Company Strategy
-
- Some product providers are expanding their advice offering…
- …but others are concerned about the risks in providing advice
- Technology platforms - Online savings and investing platforms offer user-friendly alternatives
- Savings and investing are the core business, but later-life planning is the future
- Execution-only online mortgage sales could be a disruptive force to specialist brokers
The Consumer – What You Need to Know
-
- Most people would rather manage their own finances
- Banks and building societies are the most used form of professional financial support
- Independent financial advice receives very high satisfaction levels amongst consumers
- Most consumers expect to need financial advice in the future
- Financial advice is perceived as being too costly
- 18% would be prepared to go online if it reduced the cost of advice
- Some consumers are at risk of becoming alienated from the industry
- Target Groups: The Advice-wary to the Open-minded
Attitudes toward Financial Management
-
- The majority of consumers understand the importance of saving…
- …and managing their finances
-
- Figure 11: Attitudes toward financial management, February 2015
Financial Advice Use
-
- 41% of people have sought out professional advice
- Advice from banks and building societies is the most common form of professional advice
-
- Figure 12: Financial advice usage, February 2015
- Financial advisers are more likely to be used by older people
- Advice from banks/building societies and Money Advice Service (MAS) more popular with 25-34 year-olds than other age groups
-
- Figure 13: Financial advice usage, by age, February 2015
- Just 12% of people who are financially struggling or in trouble turn to consumer organizations
- 47% of people have not sought financial advice in the past three years
Satisfaction with Financial Advice
-
- 44% of people who received paid professional advice were “very happy” with the service
-
- Figure 14: Level of satisfaction with service, February 2015
- “You get what you pay for”: free guidance and pension freedoms
Future Financial Advice Needs
-
- The majority of people expect to need financial advice in the future
-
- Figure 15: Future financial advice needs, February 2015
- Mortgage Market Review (MMR) – 48% of 25-34-year-olds expect to need advice on mortgages
- Pension freedoms – 26% of people over 45 expect to seek pension/retirement planning advice in the future
- Slim demand for advice on life/protection insurance
- Financial advice clients tend to be repeat customers
-
- Figure 16: Future financial advice needs, by Financial advice usage, February 2015
- Younger people are more likely to require advice in more areas
-
- Figure 17: Number of types of future financial advice needs by age
Financial Advice Payment Preference
-
- Fixed fees are the preferred way of paying for financial advice
-
- Figure 18: Financial advice payment preference, February 2015
- 18-24-year-olds show twice as much interest in paying an hourly rate for financial advice
- Financial advice on demand, please
-
- Figure 19: Attitudes towards financial advice, February 2015
- People see financial advice as being costly
Attitudes towards Accessing Financial Advice
-
- Most people would prefer to receive financial advice online rather than face-to-face
-
- Figure 20: Attitudes toward accessing financial engagement, February 2015
- Over a fifth of users would check online reviews before using a particular adviser
- Higher earners show greater preference for face-to-face advice than other income brackets
Attitudes towards Financial Advice
-
- The majority would only use a financial adviser who describes their services as ‘independent’
- The industry must work hard to gain trust among those on the fence
- “Do it for me” vs “Help me help myself”
-
- Figure 21: Attitudes towards financial advice services, February 2015
- Alienation with financial advice
- 44% of consumers are confused as to how financial service firms can help them manage their financial affairs
-
- Figure 22: Attitudes towards financial management, February 2015
Consumer’s Confidence in their Financial Decision-Making
-
- Most consumers are confident about making their own financial decisions…
- …but less so when it comes to big financial choices
-
- Figure 23: Attitudes toward financial management, February 2015
- Consumers display a fair amount of cynicism about financial advice
-
- Figure 24: Attitudes toward financial management, February 2015
- Target Groups: Segmenting the advice market: from the Advice-wary to the Open-minded
-
- Figure 25: Target groups, February 2015
- The Open-minded: Open to advice but confused as to how to get it
- Face-to-face meetings are the best way of engagement
-
- Figure 26: Attitudes towards accessing financial advice, by target group, February 2015
- The Financially Self-sufficient
- Pensions and retirement and tax/inheritance planning advice appeals to the Financially self-sufficient
-
- Figure 27: Future financial advice needs, by target group, February 2015
- The Advice-wary: The Nervous Planners
- The Advice-wary: Carpe Diem
- Costs and trust are the main barriers for this group
-
- Figure 28: Attitudes towards financial advice, by Target Groups, February 2015
- The Financially Apathetic
Appendix
-
- Abbreviations
Back to top