There is a “clear need” to redouble efforts to convey the implications of the Retail Distribution Review as this will help advisers tap into an estimated 14m market of unadvised consumers, according to the Chartered Insurance Institute.
New research suggests that at least 5.3m new customers who had previously ruled out financial advice are reconsidering it as a result of the changes brought about by the RDR. However, the CII believes this untapped market could be much larger if the regulator and industry did more to communicate the benefits of RDR.
Taking the CII’s survey sample of 2,010 individuals as representative of the UK population, this means just over half of the estimated 30m adults who claim to have not received financial advice cited financial reasons such as affordability of advice and not having the funds to invest.
This leaves a market of about 14m consumers who have the money to invest but have not considered advice. The reasons given include a lack of trust, preference to use other sources, not considering advice and self-advising.
According to the CII’s research, those most likely to reconsider advice in the light of the RDR changes are those who have not really thought about receiving advice on investments, and those who have previously preferred to self-advise.
That potential for more new customers, especially among the main target markets of those not normally considering financial advice, indicates a “clear need” to redouble efforts to convey the implications of the RDR and the value of financial advice among the general public.
The research found that awareness of the financial advice reforms among the general public has improved since 2011, with about a third of consumers who have never received advice being aware of the professionalism changes, up from less than a fifth in 2011.
Among those who have received advice before, half know about these changes. These people who are more familiar with the market already see the benefit. Over 60 per cent of those who have received advice before believe the RDR changes will improve their confidence, increasing to two-thirds among women respondents.
Laurence Baxter, head of policy and research at the CII, said: “Although there has been progress since 2011, a better communication plan is needed if the market is really going to benefit from improved public trust and confidence which was a central objective of the RDR. Our research has revealed a great opportunity for financial planners among the unadvised population, to the tune of 5-14m new consumers over time.
“It must not be forgotten that the impact of the RDR has and will be significant, but the end result will be a financial advice market that is more professional and trustworthy, with higher qualified advisers providing more transparent services and remuneration practices.”
