Key figures in the financial advice industry have called on the government and regulator to work together to fix the market after a far-reaching review found the British public's experience of the sector centres on mis-selling, distrust and being too expensive.
A report published by the Financial Conduct Authority last week revealed a series of damning findings.
At least 1.3m people claimed they had been mis-sold a pension or investment product by a financial adviser in the past year - 13 per cent of those who received regulated advice.
Of those receiving pension and investment advice prior to the last year, 16 per cent believe they were mis‑sold, and 21 per cent believe they have received bad advice.
The report also found the UK population has a limited understanding of how much advice costs and appears unsure where to go to find it.
Around three in 10 said advice would represent good value for money only if it was offered at £100 in total or less - significantly lower than than the £150 per hour typically charged by advisers.
The Financial Lives survey also found a quarter of people who have accessed a defined contribution pension in the past two years do not know how they did so.
In response, the financial services industry has said the problem is with poor marketing of the benefits of advice, rather than an issue with the services on offer, and has called on a united effort in league with the regulator to highlight ways to improve public perception of the sector.
A spokesman for advice trade body the Personal Investment Management & Financial Advice Association (Pimfa) said the advice market works for those who can access it but it faces a “demand-side failure”.
She said: “There is a clear and demonstrably positive impact on the incomes of those who take out financial advice, particularly for those on modest incomes.
“It is clearly incumbent upon the advice industry to communicate the value of financial advice to consumers.
“[But] there is a wider challenge for both government, the regulator and industry to seek to engage individuals earlier in order to engender better consumer behaviour."
She acknowledge, however, that "ultimately there remains a question around both the cost and accessibility of financial advice”.
Pimfa is currently working on a strategy which may include work to raise awareness of the value of financial advice.
Professional body the Personal Finance Society is also working on a number of initiatives to raise consumer awareness of the value of advice.
Chief executive Keith Richards said the FCA survey provided further evidence of the need for "a united approach by government, regulators and the financial services sector to raise public awareness about the value of effective financial planning".
“A united approach to engaging consumers in financial resources and education is the key to better engagement and understanding.”
Philip Martin, marketing director of network Openwork which houses around 800 advisers, said addressing the issue would need “imaginative solutions” from regulators and policymakers.
The Financial Lives survey showed that only 6 per cent of the UK adult population has sought advice in the past year but 25 per cent need it.
Someone who might need financial advice is defined by the FCA as someone who had not had advice in the past year but has investable assets of £10,000 or more or have at least £10,000 in a defined contribution pension and a plan to retire or access this pension in the next two years.
But three in 10 of those aged between 55 and 64 don't know where to look to get advice and more than half of that age group who have not had advice wouldn't pay for it at any price.
Sue Lewis, the chairman of the Financial Services Consumer Panel, said the Financial Advice Market Review - a joint initiative between the FCA and the Treasury to improve access to financial advice - was supposed to fix many of these problems.
But she said: “What it did instead was to enable banks and others to sell investment products under the pretence of offering ‘guidance’ to consumers.
“This will make it easier for people to buy investments. But, unless they use one of the few ‘robo-advisers’ that gives regulated advice, people will soon find the liability is with them, and not the firm that ‘guided’ them.
“This really matters when people decide what to do with their pension savings. The government has thrown them in at the deep end with pension freedoms.”
Ms Lewis is not the first person to pour scorn on the Financial Advice Market Review.
Earlier this year Andy Briggs, the chief executive of Aviva's UK life business, said it was "not good enough".
But Helen Ball, group distribution and development director of Tenet, said the return of banks to financial advice could be a good thing.
“The re-entrance of the banks serving the mass market, aided by robo-advice to drive down costs, will improve education and understanding.
“With knowledge and visibility will come the desire to be more informed and engaged and to seek advice.
“The challenge for advisers is to demonstrate their value. Using the analogy of the DVD being seen to herald the end of cinema and online travel sites closing down the high street travel agents, both cinema and travel agents continue to thrive because their value is understood.”
The FCA did not respond to a request for a comment.
damian.fantato@ft.com
