Pensions provider Barnett Waddingham has said there is the potential for a boom in ‘mass market advice’ after it published data showing people were extremely unlikely to pay for a financial adviser until they earn more than £50,000 a year.
At this earnings level, which covers the top 10 per cent of earners, more than a third (34 per cent) of 30-49 year olds said they were likely to pay for advice on their retirement needs rather than doing it themselves, giving their willingness to do so as either four or five out of five.
Below this earnings level the propensity to pay for advice falls away sharply, with only 13 per cent of those earning between £30,000 and £50,000, and 12 per cent of those with an annual income below £30,000, willing to do so.
Barnett Waddingham asked 850 UK adults across various age ranges about their attitudes towards pension saving, and specifically asked respondents aged 30-49 on their willingness to pay to seek full financial advice.
Overall 20 per cent were very likely or quite likely to pay for advice, while 52 per cent said they were not likely to seek advice and would rather decide upon their own options. This falls to 37 per cent among those earning more than £50,000.
Damian Stancombe, head of workplace health and wealth at Barnett Waddingham, told FTAdviser that the results were not a great surprise and highlighted the potential for a boom in advice targeting mainstream consumers.
However, referencing the simplified advice or guidance-style models that are likely to evolve for this cohort, Mr Stancombe suggested that employers and other groups may be the key beneficiaries rather than regulated advisers.
He said: “The problem is that there aren’t enough advisers dealing with the lower end of the spectrum, so the question for the majority of the market is: do we trust and value advice enough to pay for it?
“The government must relax complications around who is to blame when third party pensions guidance goes wrong, while there must also be an onus on individual responsibility.”
The figures come on the heels of a study last week which revealed around one in six advisers now applies a minimum threshold of £50,000 in investible assets for clients to be deemed viable post-RDR. The figures also revealed this asset hurdle is on the rise.
A survey by online investment platform Rplan revealed a quarter of advisers now require clients to have over £30,000 of investable assets, while 16 per cent require £50,000. A straw poll by FTAdviser showed that advisers agreed £50,000 was a realistic threshold for new clients.
Barnett Waddingham’s research also revealed that 81 per cent of 18-29 year-olds did not understand pensions, with the majority of this age group preferring to save money for their first home or clear debt.
Also within this age group, 40 per cent had never heard of auto-enrolment and a third admitted to having no pension savings at all.
In the 50 plus age group, 80 per cent were aware of the Budget pension freedoms, but two-thirds did not properly understand their retirement options.
Mr Stancombe added that the guidance at the point of retirement would be 10 years too late for most people, and stressed that people need to be shaping their investments far earlier.
“People understand property and cash, and who’s to say that’s the wrong choice, but it’s likely they won’t maximise good retirement outcomes.”
peter.walker@ft.com
