Consumers and Financial Advice - UK - April 2011

INTRODUCTION
Abbreviations
EXECUTIVE SUMMARY
The market for advice
In-branch staff, internet, and family and friends closely aligned at the top
Figure 1: Main sources of advice used, March 2011
Only two fifths of IFA clients have an on-going relationship with the adviser
Figure 2: IFA usage, March 2011
Figure 3: Number of sources of advice used, March 2011
The economy and regulation
The RDR
Government launches Money Advice Service
A tricky economic environment
Impact of the Economy on sentiment
Financial priorities
Figure 4: Savings, investment, borrowing and debt repayment – consumers’ expected activity, by quarter, Q3/Q4 2002-Q1/Q2 2011
Advice and the slowdown
The consumer
Product Ownership
Figure 5: Overall financial product ownership, March 2011
Value of investible assets
Figure 6: Trends in total value of investible assets, 2010 and 2011
Paying for financial advice
Attitudes towards financial advice
What we think
ISSUES IN THE MARKET
What kind of advice are consumers likely to seek in the current environment?
What do consumers think about investment adviser compensation?
How can IFAs grow client numbers?
Are people prepared to rely on a single source of advice?
How will consumers be affected by the RDR?
FUTURE OPPORTUNITIES
The adviser social network
A results-oriented approach to investment advice
INTERNAL MARKET ENVIRONMENT
Key points
The RDR
Unfavourable side effects
Barclays shuts down financial planning arm
Will other high street banks follow suit?
FSA issues warning about churn in the run-up to RDR
Over three fifths of FOS complaints are about banks
Figure 7: Financial services firms complained about, by sector, 2006/07-2009/10
The Money Advice service launches
BROADER MARKET ENVIRONMENT
Key points
Economic instability brings savings to the fore
Economic reality keeps focus on short term
Figure 8: Monthly change in RPI and average weekly earnings, 2005-10
The housing market slowdown
Figure 9: Gross and net secured lending, seasonally adjusted, 2000-10
Demand for investment advice linked to market performance
Figure 10: FTSE 100 and FTSE All-Share – daily index movements, February 2005-February 2011
IMPACT OF THE ECONOMY ON SENTIMENT
Key points
What consumer sentiment could mean for advice
Consumer confidence remains in the doldrums
Figure 11: GfK NOP Consumer Confidence Index, March 2005-March 2011
More now say they are feeling the effects of the slowdown
Figure 12: Impact of the slowdown, February 2009-February 2011
Consumers pessimistic about 2011
Figure 13: Macroeconomic expectations for the coming year, December 2010
FINANCIAL PRIORITIES
Key points
Saving and investing top priority but financial activity will remain low
Figure 14: Savings, investment, borrowing and debt repayment – consumers’ expected activity, by quarter, Q3/Q4 2002-Q1/Q2 2011
Many frustrated by poor returns on savings
Figure 15: Agreement with statements about current financial situation, March 2011
PRODUCT OWNERSHIP
Key points
Consumers most likely to own non-advised products
Figure 16: Financial product ownership, March 2011
Internet has made people more confident to make their own decisions
Who’s buying advised products?
Figure 17: Demographic profile of product ownership in key markets for financial advice, March 2011
VALUE OF INVESTIBLE ASSETS
Key points
No significant change in wealth distribution over the last 12 months
Figure 18: Trends in total value of investible assets, 2010 and 2011
Advised product ownership linked with level of investible assets
Figure 19: Financial products ownership, by total value of investible assets, March 2011
Wealth and demand for advice rises with age
Figure 20: Total value of investible assets, by demographics, March 2011
SOURCES OF FINANCIAL ADVICE
Key points
Bank staff, internet and friends and family top sources of advice
Figure 21: Main sources of advice used, March 2011
Two in five IFA clients have an ongoing relationship with the IFA
Figure 22: IFA usage, March 2011
More than a third now use multiple sources of advice
Figure 23: Number of sources of advice used, March 2011
A positive development for the advice market
Those using multiple sources more likely to seek professional advice
Figure 24: Main sources of advice used, by number of sources of advice used, March 2011
Number of advice sources by value of investible assets
Figure 25: Total value of investible assets, by repertoire of main sources of advice used, March 2011
Product ownership has an influence on the source of advice used
Figure 26: Main sources of advice used, by ownership of select financial products, March 2011
Level of investible assets key indicator of type of advice used
Figure 27: Main sources of advice used, by total value of investible assets, March 2011
Age a key indicator where one will go for advice
Figure 28: Main sources of advice used, by gender and age, March 2011
More affluent more likely to seek out advice in the first place
Figure 29: Main sources of advice used, by socio-economic group, March 2011
Friends and family significant source of advice for high earners
Figure 30: Main sources of advice used, by gross annual household income, March 2011
ADVICE AND THE SLOWDOWN
Key points
Most people pushing through the slowdown
Figure 31: Current financial situation, March 2011
The worse off are less likely to be getting advice
Figure 32: Sources of financial advice, by current financial situation, March 2011
Just over a fifth are highly concerned about their near-term prospects
Figure 33: Projected financial situation over the next year, March 2011
Easing concerns with proactive advice
Figure 34: Sources of financial advice, by projected financial situation over the next year, March 2011
PAYING FOR FINANCIAL ADVICE
Key points
Most consumers believe advisers are only out for themselves
Figure 35: Attitudes towards paying for financial advice, March 2011
Mixed signals about commissions vs. upfront fees
Performance is what really matters
A missed opportunity?
IFA clients less sceptical of adviser integrity
Figure 36: Attitudes towards paying for financial advice, by use of select types of financial advice, March 2011
Competing with free online advice
A new approach to converting the sceptics
Those with significant levels of wealth are most open to upfront fees
Figure 37: Attitudes towards paying for financial advice,  by total value of investible assets, March 2011
Statement agreement and demographics
Figure 38: Demographic profile of those who agreed with statements about paying for financial advice, March 2011
ATTITUDES TOWARDS FINANCIAL ADVICE
Key points
Consumers most turned off by bank telephone staff
Figure 39: Best and worst performers for word association for each channel of advice, March 2011
Bank branch staff rate as competent and reliable
Figure 40: Responses to words associated with knowledge and risk, by different channels of advice, March 2011
Telephone staff can’t be trusted and IFAs are only out for themselves
Figure 41: Responses to words associated with trust, by different channels of advice, March 2011
In-branch advice seen as value for money…
Figure 42: Responses to words associated with cost, by different channels of advice, March 2011
…but in reality the internet is the most cost-effective source of advice
Bank and building society branch staff score well on emotive factors
Figure 43: Responses to words associated with emotional factors, by different channels of advice, March 2011
Respect for IFA expertise rises with value of investible assets
Figure 44: IFA and bank branch channel word association responses, by level of assets held, March 2011
APPENDIX – PRODUCT OWNERSHIP
Figure 45: Financial product ownership, by demographics, March 2011
Figure 46: Financial product ownership, by demographics, March 2011
APPENDIX – VALUE OF INVESTIBLE ASSETS
Figure 47: Financial product ownership, by total value of investible assets, March 2011
Figure 48: Total value of investible assets, by demographics, March 2011
APPENDIX – SOURCES OF FINANCIAL ADVICE
Figure 49: Main sources of advice used, by financial product ownership, March 2011
Figure 50: Main sources of advice used, by financial products ownership, March 2011 (continued)
Figure 51: Main sources of advice used, by total value of investible assets, March 2011
Figure 52: Main sources of advice used, by demographics, March 2011
Figure 53: Main sources of advice used, by demographics, March 2011 (continued)
Figure 54: Repertoire of main sources of advice used, by demographics, March 2011
Figure 55: Financial product ownership, by IFA usage, March 2011
Figure 56: Total value of investible assets, by IFA usage, March 2011
Figure 57: Attitudes towards paying for financial advice, by IFA usage, March 2011
Figure 58: IFA usage, by demographics, March 2011
APPENDIX – ADVICE AND THE SLOWDOWN
Figure 59: Sources of financial advice, by projected financial situation over the next year, March 2011
Figure 60: Projected financial situation over the next year, by demographics, March 2011
Figure 61: Current financial situation, by demographics, March 2011
APPENDIX – PAYING FOR FINANCIAL ADVICE
Figure 62: Attitudes towards paying for financial advice, by ownership of select financial products, March 2011
Figure 63: Attitudes towards paying for financial advice, by demographics, March 2011
Figure 64: Attitudes towards paying for financial advice, by demographics, March 2011 (continued)
Figure 65: Attitudes towards paying for financial advice, by demographics, March 2011 (continued)
Figure 66: Attitudes towards paying for financial advice, by demographics, March 2011 (continued)
Figure 67: Financial product ownership, by attitudes towards paying for financial advice, March 2011
Figure 68: Financial product ownership, by attitudes towards paying for financial advice, March 2011 (continued)
Figure 69: Financial product ownership, by attitudes towards paying for financial advice, March 2011 (continued)
Figure 70: Financial product ownership, by attitudes towards paying for financial advice, March 2011 (continued)
Figure 71: Main sources of advice used, by attitudes towards paying for financial advice, March 2011
Figure 72: Main sources of advice used, by attitudes towards paying for financial advice, March 2011 (continued)
Figure 73: Main sources of advice used, by attitudes towards paying for financial advice, March 2011 (continued)
Figure 74: Main sources of advice used, by attitudes towards paying for financial advice, March 2011 (continued)
Figure 75: Total value of investible assets, by attitudes towards paying for financial advice, March 2011
Figure 76: Total value of investible assets, by attitudes towards paying for financial advice, March 2011 (continued)
Figure 77: Total value of investible assets, by attitudes towards paying for financial advice, March 2011 (continued)
Figure 78: Total value of investible assets, by attitudes towards paying for financial advice, March 2011 (continued)
APPENDIX – ATTITUDES TOWARDS FINANCIAL ADVICE
Figure 79: Sources of financial advice word association, March 2011
Figure 80: IFA and bank branch channel word association responses, by sources of advice used, March 2011