The financial advice sector has seen an influx of private equity and US conglomerates invest millions to acquire businesses in the industry over the last few years.
They see an opportunity to make a profit in the sector – and this is definitely the case, as Open Money’s 2021 advice gap report found only 7% of Brits has paid for advice in the last two years.
This compares to just 10% who said the same in Open Money’s research last year.
There are a lot of potential clients out there – but advisers will have to look at their business models and fees to attract them.
The report, which surveyed 2,000 UK adults, also found an estimated 6 million people in Britain would be willing to get financial advice, but think it costs too much. This has increased from 5.3 million in 2020.
Some 20% of women said they would be willing to pay for advice if it cost less, compared with just 14% of men.
Young people more willing to pay for advice
A business opportunity for advisers could come in the form of young Brits.
Although only 12% of those who have not paid for advice in the last two years say they are likely to do so at some point, this increases to 21% for people aged 18 to 24.
The same age group was also less sensitive to price, with 11% saying that advice would need to cost less for them to consider it, compared to 17% of all respondents.
This is a drop from last year’s research, where 25% of 18-24 year-olds were concerned about the cost of advice.
But there is still work to be done about educating Brits under 25.
According to the report, they are more likely to turn to social media for financial advice than pay a professional adviser, and some 9% of respondents in the age group said they use social media such as TikTok and Instagram for financial advice, compared to just 3% who have paid for professional advice across all age groups.
Trust
The survey also found that trust and value are important factors when it comes to encouraging people to pay for advice.
A third (33%) of respondents who would be unlikely to consider paying for financial advice, having also not done so in the past two years, said they would need to be convinced that advice would save them money.
A further third (32%) would need to be sure they could trust the advice.
Anthony Morrow, co-founder of Open Money, said: “Although the affordable advice gap has increased, our research found that trust and value are far more important than cost to both genders and all ages. People want to be convinced that taking advice will make a difference to their finances and save them money overall.
“Trust has long been an issue in the advice sector: memories of a sales and commission driven culture at some firms and an over-reliance on complex products and jargon have damaged people’s view of all advisers. Restoring people’s faith in the benefits of financial advice is therefore crucial to closing the advice gaps.”
