Non-advised consumers are unable to access ongoing, face-to-face advice at what they believe is a ‘reasonable’ price, according to research for the Financial Conduct Authority.
Consumer research found a quarter (26 per cent) of adults who had not received regulated advice in the past 12 months, but could benefit from it, would not be willing to pay for regulated advice, even if it was priced as cheaply as £10.
Meanwhile, of those who would be willing to pay, most would want to pay less than 1 per cent of the amount invested.
The research was commissioned by the FCA for its evaluation of the impact of the Retail Distribution Review and the Financial Advice Market Review, published today (December 3).
Additionally, the amount adults saw as good value for money did not increase by much as the amount invested increased. According to the research, “most would expect to pay no more than £250 regardless of the amount invested”.
It continued: “This does not align particularly well with adviser business models, which are based on percentage fees rather than a fixed or capped amount.”
Ignition House, which conducted the research, said there was a “fundamental gap” in the advice market, particularly for consumers with smaller pots, “as they simply cannot access the ongoing, face-to-face, advice that firms offer at what they perceive to be a ‘reasonable’ or acceptable price”.
But the research consultancy noted they would not necessarily need an ongoing service, as their needs could be simpler and met by “one-off transactional support”.
Guidance more popular than advice
The research also found 8 per cent of UK adults received regulated financial advice in the past 12 months.
The most cited reason by consumers for not accessing financial advice was the perception that they would not benefit from it.
Additionally, three in 10 (28 per cent) used information or guidance, such as from media, friends and family. But a majority (67 per cent) of adults had not used information or guidance in the last 12 months.
While the regulator noted that consumers think guidance can be helpful for understanding ‘the basics’, it added: “[In] its current form, they said it often does not go far enough to help them feel confident to make decisions such as about investing in an equity ISA.”
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