The UK could be on the cusp of a mis-buying crisis just a year after the final Financial Advice Market Review (FAMR) recommendations were released.
The Financial Advice Market Review published 28 recommendations to help make financial advice more accessible and affordable for consumers, but research from LV revealed more than half of over-55s will not take financial advice before they retire.
One of the main reasons cited for foregoing advice by the 1,008 UK adults aged 55 plus who are retired or plan to do so within 10 years was that many consumers do not understand what it could offer.
A third of those who participated in the research, which was conducted online by Opinium from 16 to 21 February, were not certain of the difference between guidance and advice and few viewed it as good value for money.
LV has urged the government, regulators, and industry to do more to show consumers the value of advice, including better promotion of the Financial Advice Market Review reforms.
The pension advice allowance and the tax break for employer arranged advice, both recommendations from the Financial Advice Market Review, are due to take effect in April but the majority of the report participants were completely unaware of these offerings.
Pension freedoms have further complicated matters now that retirees have options for their money beyond buying an annuity.
LV recommended a new single financial guidance body with the requirement to signpost consumers to advice where appropriate could help address these issues.
Philip Brown, head of policy at LV, said poor understanding of financial advice is particularly worrying at a time when consumers are faced with more complex decisions about retirement than ever before.
“Taking financial advice is vital to ensure consumers are equipped to make the most of their hard-earned savings and get the income they need in retirement.”
Although the work of the Financial Advice Market Review is set to address the advice needs of the mass market, Mr Brown said that not enough is being done to educate consumers about the value of advice.
“LV has repeatedly warned that without further action to increase take up of advice we face a mis-buying crisis, and showing consumers why it is good value for money is a key part of this.”