Table of Contents
Overview
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- What you need to know
Executive Summary
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- The market
- The number of advice firms reporting to the FCA grew by 163 last year
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- Figure 1: Total number of firms and revenue earned by firms advising on retail investment business, mortgage business and non-investment insurance business, 2013-17
- The consumer
- 28% have used financial advice in the last three years
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- Figure 2: Sources of financial advice used in the last three years, April 2018
- Consumers are most likely to interact with products that don’t require advice
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- Figure 3: Products arranged in the last three years, April 2018
- Mortgages are the most-advised products
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- Figure 4: Products where professional advice was used, April 2018
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- Figure 5: Use of professional advice for each product arranged in the last three years, April 2018
- Cost is the key barrier to using financial advice
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- Figure 6: Reasons for not using professional financial advice in the last three years, April 2018
- Around half are willing to pay for advice for some sort of financial product
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- Figure 7: Willingness to pay for financial advice for different products, April 2018
- Online services have growing appeal but face-to-face advice is still preferred
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- Figure 8: Willingness to pay for different financial advice channels, by product that people would be willing to pay for advice for, April 2018
- Consumers want providers to do more to explain the benefits of advice
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- Figure 9: Attitudes towards financial advice, April 2018
- What we think
Issues and Insights
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- The need to reassert the advantages of advice over guidance
- The facts
- The implications
- People are warming to online services but still consider them a cheap imitation
- The facts
- The implications
The Market – What You Need to Know
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- The number of advice firms reporting to the FCA grew by 163 last year
- Firms meet new regulatory requirements
The Financial Advice Market
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- The number of advice firms reporting to the FCA grew by 163 last year
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- Figure 10: Total number of firms and revenue earned by firms advising on retail investment business, mortgage business and non-investment insurance business, 2013-17
- Financial advisers account for 42% of firms
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- Figure 11: Share of financial advice firms, by type of firm, 2017
- Complaints rise to highest level since 2013…
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- Figure 12: Number of complaints made to financial services firms associated with advising, selling and arranging, 2013-17
- …driven almost entirely by a resurgence of PPI disputes
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- Figure 13: Number of complaints made to financial services firms associated with advising, selling and arranging, by product type, H2 2017
Regulatory Context
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- MiFID II takes effect…
- …alongside a new definition of advice
- GDPR forces advisers to look at client communications
- FCA raises concerns following reviews of automated advice
Companies and Brands – What You Need to Know
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- Firms continue to see acquisitions as key to growth
- Established providers and challengers continue to develop automated services
Competitive Strategies
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- Firms continue to see acquisitions as key to growth
- Providers developing advice services in the FCA sandbox
- High street banks and automated solutions
The Consumer – What You Need to Know
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- 28% have used financial advice in the last three years
- Mortgages are the most-advised products
- Cost is the key barrier to using financial advice
- Around half are willing to pay for advice for some sort of financial product
- Online services have growing appeal but face-to-face advice is still preferred
- 68% think providers should do more to explain the benefits of advice
Sources of Financial Advice and Guidance
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- 28% have used financial advice in the last three years
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- Figure 14: Sources of financial advice used in the last three years, April 2018
- Cost concerns exclude lower earners from the market
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- Figure 15: Use of professional advice services* in the last three years, by annual household income, April 2018
- People tend to rely on one source of advice
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- Figure 16: Number of sources of financial advice and guidance used in the last three years, excluding “Friends and/or family”, April 2018
- Figure 17: Sources of financial advice used in the last three years, by number of sources of financial advice and guidance used in the last three years, including “Friends and/or family, April 2018
Products Arranged and Use of Advice
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- Consumers are most likely to interact with products that don’t require advice
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- Figure 18: Products arranged in the last three years, April 2018
- Pensions and retirement planning reliant on informal guidance
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- Figure 19: Sources of financial advice used in the last three years, by people who arranged a pension or retirement planning in the last three years, by April 2018
- 28% of advice clients discussed savings in the last three years…
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- Figure 20: Products where professional advice was used, April 2018
- …but mortgages are the most-advised products
- Reliance on advice deters potential investors
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- Figure 21: Use of professional advice for each product arranged in the last three years, April 2018
- Banks remain a major source of advice
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- Figure 22: Sources of financial advice used in the last three years, by products for which advice was used, April 2018
Barriers to Using Financial Advice
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- Cost is key…
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- Figure 23: Reasons to not use professional financial advice in the last three years, April 2018
- …but consumers are equally driven by a desire to do it all themselves
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- Figure 24: Consumers who did not use professional financial advice because they “would rather rely on my own knowledge/research”, by age, April 2018
- Is guidance distorting perceptions of the value of advice?
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- Figure 25: Selected reasons to not use professional financial advice in the last three years, by sources of financial guidance used in the last three years, April 2018
Willingness to Pay for Advice
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- Around half are willing to pay for advice on a financial product
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- Figure 26: Willingness to pay for financial advice for different products, April 2018
- Wealthier consumers more likely to pay for advice…
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- Figure 27: Willingness to pay for financial advice for any financial product, by value of savings and investments, April 2018
- …but mortgages pique interest among those with lower value assets
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- Figure 28: Willingness to pay for financial advice for a mortgage, by value of savings and investments, April 2018
- Previous experience of advice increases willingness to pay
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- Figure 29: Willingness to pay for financial advice for different products, by whether consumers have used professional financial advice* in the last three years, April 2018
Willingness to Pay for Advice Channels
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- Consumers are opening up to online services…
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- Figure 30: Willingness to pay for different financial advice channels, by product that people would be willing to pay for advice for, April 2018
- …but face-to-face appointments are most valued
Attitudes towards Financial Advice
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- Make the benefits clearer to increase take-up of advice
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- Figure 31: Attitudes towards financial advice, April 2018
- Two in five are willing to use an automated service
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- Figure 32: Agreement with the statement “I’d be happy to use online advice that gives automated recommendations based on my personal and financial information”, by age, April 2018
- Consumers generally against the idea of regular check-ups
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
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