New study shows 84% of consumers still ‘unaware’ of RDR

The vast majority of consumers are still completely unaware of the changes coming to the advice sector under the Retail Distribution Review, with a new study conducted by Deloitte showing that some 84 per cent have no knowledge of the impending rule changes or what they will mean.

The news comes on the back of increasing criticism of the Financial Services Authority’s handling of the transition to RDR, with many advisers and other financial services professionals saying not enough has been done to ensure consumer awareness of the new rules.

Last week, the FSA said it would be imminently launching a broad campaign to make consumers aware of the RDR and its consequences.

It would seem this is not before time. According to the Deloitte research, which is based on a survey of 2,000 people, 84 per cent of consumers are unaware of the RDR and that consumers will have to pay separately for advice under the new adviser charging rules.

The study also claimed that 54 per cent of consumers will refuse financial advice if they are charged a fee.

However, Deloitte admitted that survey respondents were not told that their product fees would in most cases see a corresponding fall as adviser trail commission would be stripped out from product charges, which means these results are negatively skewed.

The report said 7 per cent would be likely to reduce the the number of times they use financial advisers if charged a fee of between £400-£600, or 3 per cent of invested assets. Bank clients were shown to be five times as likely as IFAs’ customers to reject paying fees for advice.

The survey also showed that attitudes to paying for advice vary according to wealth and where consumers take advice.

Only 3 per cent of people with no savings would be prepared to pay a fee for advice, whereas 14 per cent of people with savings above £50,000 would be prepared to pay a fee.

This has been a bone of contention within the advisory industry with some commentators adamant that the ‘middle market’ will not be able to afford fees.

A recent CoreData study, Consumer fee threshold and appetite, revealed that clients would expect to pay an average of £38.90 an hour to use an adviser and would expect a full financial review to last four hours.

Andrew Power, lead RDR partner at Deloitte, said: “Deloitte’s research indicates that many consumers, particularly in the mass market, are unwilling to pay such fees.

“As a result, the advice gap – the shortfall between the amount of advice required and that provided – is likely to increase as advisers leave the industry or focus on wealthier customers.

“These changes pose a huge challenge to banks, building societies, insurers and asset managers who will have to find new ways to distribute their products and advisers who will have to persuade consumers of the benefits of paying for financial advice.”