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Consumers and Financial Advice - UK - April 2011

In this report Mintel explores consumers’ attitudes towards financial advice. The main focus is on what they are looking for from providers of financial advice. In addition to detailing how the economic slowdown has impacted consumer demand for advice, the report reveals how consumers use advice, what they think about paying for it, and finally how they feel about the various providers of it.

  • The majority of consumers have expressed at least a minor degree of concern about their personal finances over the next year. Each type of advice provider has an opportunity to offer and promote services which help people be more proactive about their finances.
  • Nearly two-fifths of adults now use multiple sources of advice. This can be viewed as a positive development for the advice market as a more informed consumer will be more likely to seek out paid for advice for more complex products after they’ve already exhausted easy-to-access information.
  • The reputation of the adviser community is considerably better among those who have used an IFA than among those who have not. Since actual experience with an IFA can help improve people’s perception of them, more IFAs may want to consider offering prospective clients a ‘free’ or ‘discounted’ trial period.
  • Reflecting the specialised nature of IFA services, although two-fifths of people who have visited an IFA visit them regularly, the majority use IFAs relatively infrequently – as a one off (35%) or just a few times (26%).
  • People who say they are having a hard time with their finances are the least likely to seek financial advice. In terms of retail sources of financial advice, banks and building societies are in the best position to help many of those who are struggling.
  • In an RDR motivated move, in January 2011 Barclay’s announced plans to close down its in-branch financial planning advice service. Should other high street banks follow suit the mass-market consumer will become more heavily reliant on the internet as a source of investment advice.

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market for advice
            • In-branch staff, internet, and family and friends closely aligned at the top
              • Figure 1: Main sources of advice used, March 2011
            • Only two fifths of IFA clients have an on-going relationship with the adviser
              • Figure 2: IFA usage, March 2011
              • Figure 3: Number of sources of advice used, March 2011
            • The economy and regulation
              • The RDR
                • Government launches Money Advice Service
                  • A tricky economic environment
                    • Impact of the Economy on sentiment
                      • Financial priorities
                        • Figure 4: Savings, investment, borrowing and debt repayment – consumers’ expected activity, by quarter, Q3/Q4 2002-Q1/Q2 2011
                      • Advice and the slowdown
                        • The consumer
                          • Product Ownership
                            • Figure 5: Overall financial product ownership, March 2011
                          • Value of investible assets
                            • Figure 6: Trends in total value of investible assets, 2010 and 2011
                          • Paying for financial advice
                            • Attitudes towards financial advice
                              • What we think
                              • Issues in the Market

                                  • What kind of advice are consumers likely to seek in the current environment?
                                    • What do consumers think about investment adviser compensation?
                                      • How can IFAs grow client numbers?
                                        • Are people prepared to rely on a single source of advice?
                                          • How will consumers be affected by the RDR?
                                          • Future Opportunities

                                            • The adviser social network
                                              • A results-oriented approach to investment advice
                                              • Internal Market Environment

                                                • Key points
                                                  • The RDR
                                                    • Unfavourable side effects
                                                      • Barclays shuts down financial planning arm
                                                        • Will other high street banks follow suit?
                                                          • FSA issues warning about churn in the run-up to RDR
                                                            • Over three fifths of FOS complaints are about banks
                                                              • Figure 7: Financial services firms complained about, by sector, 2006/07-2009/10
                                                            • The Money Advice service launches
                                                            • Broader Market Environment

                                                              • Key points
                                                                • Economic instability brings savings to the fore
                                                                  • Economic reality keeps focus on short term
                                                                    • Figure 8: Monthly change in RPI and average weekly earnings, 2005-10
                                                                  • The housing market slowdown
                                                                    • Figure 9: Gross and net secured lending, seasonally adjusted, 2000-10
                                                                  • Demand for investment advice linked to market performance
                                                                    • Figure 10: FTSE 100 and FTSE All-Share – daily index movements, February 2005-February 2011
                                                                • Impact of the Economy on Sentiment

                                                                  • Key points
                                                                    • What consumer sentiment could mean for advice
                                                                      • Consumer confidence remains in the doldrums
                                                                        • Figure 11: GfK NOP Consumer Confidence Index, March 2005-March 2011
                                                                      • More now say they are feeling the effects of the slowdown
                                                                        • Figure 12: Impact of the slowdown, February 2009-February 2011
                                                                      • Consumers pessimistic about 2011
                                                                        • Figure 13: Macroeconomic expectations for the coming year, December 2010
                                                                    • Financial Priorities

                                                                      • Key points
                                                                        • Saving and investing top priority but financial activity will remain low
                                                                          • Figure 14: Savings, investment, borrowing and debt repayment – consumers’ expected activity, by quarter, Q3/Q4 2002-Q1/Q2 2011
                                                                        • Many frustrated by poor returns on savings
                                                                          • Figure 15: Agreement with statements about current financial situation, March 2011
                                                                      • Product Ownership

                                                                        • Key points
                                                                          • Consumers most likely to own non-advised products
                                                                            • Figure 16: Financial product ownership, March 2011
                                                                          • Internet has made people more confident to make their own decisions
                                                                            • Who’s buying advised products?
                                                                              • Figure 17: Demographic profile of product ownership in key markets for financial advice, March 2011
                                                                          • Value of Investible Assets

                                                                            • Key points
                                                                              • No significant change in wealth distribution over the last 12 months
                                                                                • Figure 18: Trends in total value of investible assets, 2010 and 2011
                                                                              • Advised product ownership linked with level of investible assets
                                                                                • Figure 19: Financial products ownership, by total value of investible assets, March 2011
                                                                              • Wealth and demand for advice rises with age
                                                                                • Figure 20: Total value of investible assets, by demographics, March 2011
                                                                            • Sources of Financial Advice

                                                                              • Key points
                                                                                • Bank staff, internet and friends and family top sources of advice
                                                                                  • Figure 21: Main sources of advice used, March 2011
                                                                                • Two in five IFA clients have an ongoing relationship with the IFA
                                                                                  • Figure 22: IFA usage, March 2011
                                                                                • More than a third now use multiple sources of advice
                                                                                  • Figure 23: Number of sources of advice used, March 2011
                                                                                • A positive development for the advice market
                                                                                  • Those using multiple sources more likely to seek professional advice
                                                                                    • Figure 24: Main sources of advice used, by number of sources of advice used, March 2011
                                                                                  • Number of advice sources by value of investible assets
                                                                                    • Figure 25: Total value of investible assets, by repertoire of main sources of advice used, March 2011
                                                                                  • Product ownership has an influence on the source of advice used
                                                                                    • Figure 26: Main sources of advice used, by ownership of select financial products, March 2011
                                                                                  • Level of investible assets key indicator of type of advice used
                                                                                    • Figure 27: Main sources of advice used, by total value of investible assets, March 2011
                                                                                  • Age a key indicator where one will go for advice
                                                                                    • Figure 28: Main sources of advice used, by gender and age, March 2011
                                                                                  • More affluent more likely to seek out advice in the first place
                                                                                    • Figure 29: Main sources of advice used, by socio-economic group, March 2011
                                                                                  • Friends and family significant source of advice for high earners
                                                                                    • Figure 30: Main sources of advice used, by gross annual household income, March 2011
                                                                                • Advice and the Slowdown

                                                                                  • Key points
                                                                                    • Most people pushing through the slowdown
                                                                                      • Figure 31: Current financial situation, March 2011
                                                                                    • The worse off are less likely to be getting advice
                                                                                      • Figure 32: Sources of financial advice, by current financial situation, March 2011
                                                                                    • Just over a fifth are highly concerned about their near-term prospects
                                                                                      • Figure 33: Projected financial situation over the next year, March 2011
                                                                                    • Easing concerns with proactive advice
                                                                                      • Figure 34: Sources of financial advice, by projected financial situation over the next year, March 2011
                                                                                  • Paying for Financial Advice

                                                                                    • Key points
                                                                                      • Most consumers believe advisers are only out for themselves
                                                                                        • Figure 35: Attitudes towards paying for financial advice, March 2011
                                                                                      • Mixed signals about commissions vs. upfront fees
                                                                                        • Performance is what really matters
                                                                                          • A missed opportunity?
                                                                                            • IFA clients less sceptical of adviser integrity
                                                                                                • Figure 36: Attitudes towards paying for financial advice, by use of select types of financial advice, March 2011
                                                                                              • Competing with free online advice
                                                                                                • A new approach to converting the sceptics
                                                                                                  • Those with significant levels of wealth are most open to upfront fees
                                                                                                    • Figure 37: Attitudes towards paying for financial advice, by total value of investible assets, March 2011
                                                                                                  • Statement agreement and demographics
                                                                                                    • Figure 38: Demographic profile of those who agreed with statements about paying for financial advice, March 2011
                                                                                                • Attitudes towards Financial Advice

                                                                                                  • Key points
                                                                                                    • Consumers most turned off by bank telephone staff
                                                                                                      • Figure 39: Best and worst performers for word association for each channel of advice, March 2011
                                                                                                    • Bank branch staff rate as competent and reliable
                                                                                                      • Figure 40: Responses to words associated with knowledge and risk, by different channels of advice, March 2011
                                                                                                    • Telephone staff can’t be trusted and IFAs are only out for themselves
                                                                                                      • Figure 41: Responses to words associated with trust, by different channels of advice, March 2011
                                                                                                    • In-branch advice seen as value for money…
                                                                                                      • Figure 42: Responses to words associated with cost, by different channels of advice, March 2011
                                                                                                    • …but in reality the internet is the most cost-effective source of advice
                                                                                                      • Bank and building society branch staff score well on emotive factors
                                                                                                        • Figure 43: Responses to words associated with emotional factors, by different channels of advice, March 2011
                                                                                                      • Respect for IFA expertise rises with value of investible assets
                                                                                                        • Figure 44: IFA and bank branch channel word association responses, by level of assets held, March 2011
                                                                                                    • Appendix – Product Ownership

                                                                                                        • Figure 45: Financial product ownership, by demographics, March 2011
                                                                                                        • Figure 46: Financial product ownership, by demographics, March 2011
                                                                                                    • Appendix – Value of Investible Assets

                                                                                                        • Figure 47: Financial product ownership, by total value of investible assets, March 2011
                                                                                                        • Figure 48: Total value of investible assets, by demographics, March 2011
                                                                                                    • Appendix – Sources of Financial Advice

                                                                                                        • Figure 49: Main sources of advice used, by financial product ownership, March 2011
                                                                                                        • Figure 50: Main sources of advice used, by financial products ownership, March 2011 (continued)
                                                                                                        • Figure 51: Main sources of advice used, by total value of investible assets, March 2011
                                                                                                        • Figure 52: Main sources of advice used, by demographics, March 2011
                                                                                                        • Figure 53: Main sources of advice used, by demographics, March 2011 (continued)
                                                                                                        • Figure 54: Repertoire of main sources of advice used, by demographics, March 2011
                                                                                                        • Figure 55: Financial product ownership, by IFA usage, March 2011
                                                                                                        • Figure 56: Total value of investible assets, by IFA usage, March 2011
                                                                                                        • Figure 57: Attitudes towards paying for financial advice, by IFA usage, March 2011
                                                                                                        • Figure 58: IFA usage, by demographics, March 2011
                                                                                                    • Appendix – Advice and the Slowdown

                                                                                                        • Figure 59: Sources of financial advice, by projected financial situation over the next year, March 2011
                                                                                                        • Figure 60: Projected financial situation over the next year, by demographics, March 2011
                                                                                                        • Figure 61: Current financial situation, by demographics, March 2011
                                                                                                    • Appendix – Paying for Financial Advice

                                                                                                        • Figure 62: Attitudes towards paying for financial advice, by ownership of select financial products, March 2011
                                                                                                        • Figure 63: Attitudes towards paying for financial advice, by demographics, March 2011
                                                                                                        • Figure 64: Attitudes towards paying for financial advice, by demographics, March 2011 (continued)
                                                                                                        • Figure 65: Attitudes towards paying for financial advice, by demographics, March 2011 (continued)
                                                                                                        • Figure 66: Attitudes towards paying for financial advice, by demographics, March 2011 (continued)
                                                                                                        • Figure 67: Financial product ownership, by attitudes towards paying for financial advice, March 2011
                                                                                                        • Figure 68: Financial product ownership, by attitudes towards paying for financial advice, March 2011 (continued)
                                                                                                        • Figure 69: Financial product ownership, by attitudes towards paying for financial advice, March 2011 (continued)
                                                                                                        • Figure 70: Financial product ownership, by attitudes towards paying for financial advice, March 2011 (continued)
                                                                                                        • Figure 71: Main sources of advice used, by attitudes towards paying for financial advice, March 2011
                                                                                                        • Figure 72: Main sources of advice used, by attitudes towards paying for financial advice, March 2011 (continued)
                                                                                                        • Figure 73: Main sources of advice used, by attitudes towards paying for financial advice, March 2011 (continued)
                                                                                                        • Figure 74: Main sources of advice used, by attitudes towards paying for financial advice, March 2011 (continued)
                                                                                                        • Figure 75: Total value of investible assets, by attitudes towards paying for financial advice, March 2011
                                                                                                        • Figure 76: Total value of investible assets, by attitudes towards paying for financial advice, March 2011 (continued)
                                                                                                        • Figure 77: Total value of investible assets, by attitudes towards paying for financial advice, March 2011 (continued)
                                                                                                        • Figure 78: Total value of investible assets, by attitudes towards paying for financial advice, March 2011 (continued)
                                                                                                    • Appendix – Attitudes towards Financial Advice

                                                                                                        • Figure 79: Sources of financial advice word association, March 2011
                                                                                                        • Figure 80: IFA and bank branch channel word association responses, by sources of advice used, March 2011

                                                                                                    Companies Covered

                                                                                                    • Association of British Insurers
                                                                                                    • Aviva Plc
                                                                                                    • Bank of England
                                                                                                    • Barclays Bank plc
                                                                                                    • Citizens Advice Bureau
                                                                                                    • Council of Mortgage Lenders
                                                                                                    • Ernst & Young
                                                                                                    • Financial Ombudsman Service
                                                                                                    • Financial Services Authority (The)
                                                                                                    • Gfk NOP
                                                                                                    • Hargreaves Lansdown Plc
                                                                                                    • LinkedIn
                                                                                                    • NatWest

                                                                                                    Consumers and Financial Advice - UK - April 2011

                                                                                                    £2,195.00 (Excl.Tax)