Research commissioned by financial-services consultancy firm The Lang Cat has found that the ‘advice gap’ is not just about affordability, but there is a trust factor too.
The research for the Lang Cat’s forthcoming Advice Gap 2023 report, revealed that most people (88%) who take ongoing financial advice said it represents value for money, as do 86% of people who have received one-off advice.
However, 70% of those who have not paid for financial advice in the last two years said it was unlikely they would do so in the future.
One of the barriers was trust, as 38% of respondents said their lack of trust would need to change for them to seek advice.
‘Perception gap is a big issue’
Mike Barrett, the Lang Cat consulting director, said: “It is vital to understand what drives people to take advice, and what prevents them from doing so. Affordability is a big part of the problem, but it’s not the only issue − there is a lot more that could and should be done to improve the perception, availability and accessibility of advice.
“While those who do pay for advice believe they received good value for money and trust their adviser, there’s a distinct lack of trust among those who do not. The ‘perception gap’ is a big issue for the advice sector, and if addressed, more people would potentially pay for advice.
“Providers, trade bodies, regulators and advisers all have a role to play to improve the perception of the advice sector.”
Disconnect
The Lang Cat also undertook a survey of its panel of financial advisers, which it said “shone a light on the disconnect” between the profession and regulator on the advice gap.
When asked what should be done to address the advice gap, a quarter (25%) of respondents mentioned the Financial Conduct Authority (FCA) and regulation as a barrier.
In addition, almost three quarters of participants said the FCA’s recent Broadening access to financial advice for mainstream investments paper would have no effect – either because the core demographics would not be commercially viable for them as a business (42%) or due to respondents not reading the paper due to lack of interest (32%).
‘Reform is needed’
Sarah Layden, direct wealth director at Aviva, said: “With an uncertain economic backdrop and consumers facing increasingly complex financial decisions, it is more important than ever that people can access the advice and guidance services they need to manage their money and savings effectively to achieve the right outcome for them.
“Savers are faced with endless and often complex choices about how to fund their retirement. Full financial advice has a vital role to play in serving consumers, but many people do not seek that advice and they need help. Reform is needed if we are to make simplified advice more accessible and affordable.”
M&G Wealth Advice chief executive Ross Liston added: “Trust between client and adviser is a prerequisite for successful financial planning. But that relationship has to be formed in the first place.
“We need to encourage more people to plan for better financial futures than ever before and we need more advisers throughout the industry to serve them and deliver the best experiences and financial planning that they need. This straddles education and opening up as many options as possible for people to access financial advice in a way that best suits their circumstances.
“It is critical that the industry works as one to deliver this.”
