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Consumers and Financial Advice - UK - May 2016

“Advisers are being challenged by customers, competitors and the regulator, with the ultimate result likely to be a more equitable market. This means there are opportunities for those willing to explore beyond the typical financial advice customer. Robo-advice has great potential across different financial products and customer segments but people need support to understand the value of these services on a personal basis.”
– Patrick Ross, Financial Services Analyst

This report discusses the following key topics:

  • Lifetime ISA can help advisers reach a younger audience
  • Is robo-advice enough to give financial confidence to the masses?
  • Employers are in a strong position to improve access to financial advice

The financial advice market is on the brink of yet further change following the publication of the FCA’s Financial Advice Market Review. The review concluded in March 2016, making recommendations for a healthier, more accessible market that should support advisers in improving their reach among consumers. It suggests elevating the role of the employer in delivering financial advice and engineering conditions to make automated advice services successful, with the objective of improving accessibility and financial wellbeing.

The Government has opted to withdraw the Money Advice Service and pension guidance services from consumer-facing activities, instead choosing to use the organisations to sponsor third parties to deliver advice where it is most required. This leaves plenty of room for advisers to tackle the advice gap if they so choose, but many independent advisers are struggling under the cost of providing independent services as it is, leading many to sell up to larger networks.

This Report explores consumer attitudes towards financial advice, examining use of advice in the last three years and most recently used sources of advice. The Report also examines people’s likeliness to look for advice in the future across a range of different financial products and seeks to understand attitudes towards and the opportunities for robo-advice.

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The market
          • The number of financial advice firms has recovered
            • Figure 1: Number of financial advice firms, 2008-15
          • Increasing complexity represents an opportunity for advisers
            • Companies and brands
              • Firms initiate reshuffle to bring advice services to the fore
                • The consumer
                  • More than half have not used financial advice in the past three years
                    • Figure 2: Sources of financial advice in the last three years, February 2016
                  • Friends and family are in a position of ascendancy
                    • Figure 3: Source of financial advice used most recently, February 2016
                  • Independent advisers have the highest satisfaction rates
                    • Figure 4: Satisfaction with most recent financial advice, by most recent source of financial advice, February 2016
                  • Online sources rival professional product-based advice
                    • Figure 5: Potential sources of financial advice by topic, February 2016
                  • Pay-as-you-go fixed fees prove most popular among potential customers
                    • Figure 6: Preferred payment method, February 2016
                  • Robo-advice has strong potential among older Millennials
                    • Figure 7: Awareness of robo-advice services, February 2016
                  • Free trials and clear security guarantees are key to robo-advice success
                    • Figure 8: Attitudes towards robo-advice services, February 2016
                  • What we think
                  • Issues and Insights

                    • Lifetime ISA can help advisers reach a younger audience
                      • The facts
                        • The implications
                          • Is robo-advice enough to give financial confidence to the masses?
                            • The facts
                              • The implications
                                • Employers are in a strong position to improve access to financial advice
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • The financial advice market is adapting to growing demand
                                        • Increasing complexity represents an opportunity for advisers
                                        • The Financial Advice Market

                                          • The number of financial advice firms has recovered
                                            • Figure 9: Number of financial advice firms, 2008-15
                                          • Banking and credit card complaints have increased dramatically
                                            • Figure 10: Number of complaints made to financial services firms associated with advising, selling and arranging financial products, by product type, 2013-15
                                            • Figure 11: Number of complaints made to financial services firms associated with advising, selling and arranging financial products, by product type, 2015
                                        • Regulatory Context

                                          • FCA’s Financial Advice Market Review (FAMR) produces recommendations for a healthier market
                                            • The Pensions Advisory Service, Pension Wise and Money Advice services to be realigned
                                              • EU MIFID II regulations delayed until January 2018
                                                • Lifetime ISA adds to complexity for savers
                                                • Key Players – What You Need to Know

                                                  • Firms initiate reshuffle to bring advice services to the fore
                                                  • Competitive Strategies

                                                    • Firms lay out robo-advice strategies to capture early market share
                                                      • High street banks
                                                        • Independent providers
                                                          • Advice firms merge to meet the future shape of the market
                                                            • Skipton Building Society
                                                              • Easby Gale & Phillipson and jonathanfry Plc
                                                                • Standard Life’s financial planning arm 1825 has made a series of advice acquisitions
                                                                • The Consumer – What You Need to Know

                                                                  • More than half have not used financial advice in the last three years
                                                                    • Friends and family are in a position of ascendancy
                                                                      • Online sources rival professional product-based advice
                                                                        • Pay-as-you-go fixed fees prove most popular among potential customers
                                                                          • The majority of people have not heard of robo-advice services
                                                                            • Free trials and clear security guarantees are key to robo-advice success
                                                                            • Sources of Financial Advice

                                                                              • More than half have not used financial advice in the past three years
                                                                                  • Figure 12: Sources of financial advice in the last three years, February 2016
                                                                                • Most advice users relied on one source
                                                                                  • Figure 13: Number of different sources of financial advice used in the last three years, February 2016
                                                                                  • Figure 14: Number of different sources of financial advice used in the last 3 years, by sources of financial advice used the last three years, February 2016
                                                                              • Most Recent Source of Financial Advice

                                                                                • Friends and family are in a position of ascendancy
                                                                                  • Figure 15: Source of financial advice used most recently, February 2016
                                                                                • Retirees turn to professional advice to understand retirement options
                                                                                  • Figure 16: Source of financial advice used most recently, February 2016
                                                                              • Satisfaction with Most Recent Financial Advice

                                                                                • Independent advisers have the highest satisfaction rates
                                                                                    • Figure 17: Satisfaction with most recent financial advice, by most recent source of financial advice, February 2016
                                                                                  • People with tight finances were the least satisfied with most recent financial advice
                                                                                    • Figure 18: Proportion of people that were happy with their most recent financial advice, by financial situation, February 2016
                                                                                • Potential Sources of Financial Advice by Topic

                                                                                  • Online sources rival professional product-based advice
                                                                                      • Figure 19: Potential sources of financial advice by topic, February 2016
                                                                                    • Young people are cut adrift from formal advice
                                                                                      • Figure 20: Potential users of family and/or friends as sources of advice, by age, February 2016
                                                                                  • Preferred Payment Method

                                                                                    • Pay-as-you-go fixed fees prove most popular among potential customers
                                                                                        • Figure 21: Preferred payment method, February 2016
                                                                                      • Half of people aged 55+ would not pay for advice
                                                                                        • Figure 22: Preferred payment method, by age, February 2016
                                                                                    • Awareness and Interest in Robo-advice Services

                                                                                      • The majority of people have not heard of robo-advice services
                                                                                        • Figure 23: Awareness of robo-advice services, February 2016
                                                                                      • Robo-advice has strong potential among older millennials
                                                                                        • Figure 24: Awareness and attitudes towards robo-advice, by generation, February 2016
                                                                                      • Former Money Advice Service users are a strong target market for automated advice
                                                                                        • Figure 25: Sources of financial advice used in the last 3 years, by interest in using robo-advice services, February 2016
                                                                                      • Almost half of likely robo-advice users would prefer to pay a fixed fee for advice
                                                                                        • Figure 26: Interest in using robo-advice services, by preferred payment method, February 2016
                                                                                    • Attitudes towards Robo-advice Services

                                                                                      • Free trials and clear security guarantees are key to success
                                                                                        • Blending real-world and robo-advice could reduce barriers
                                                                                          • Figure 27: Attitudes towards robo-advice services, February 2016
                                                                                        • Millennials are the most likely to be receptive to high street banks
                                                                                          • Figure 28: Attitudes towards robo-advice services, by age, February 2016
                                                                                      • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                          • Abbreviations
                                                                                            • Consumer research methodology

                                                                                            Companies Covered

                                                                                            To learn more about the companies covered in this report please contact us.

                                                                                            Consumers and Financial Advice - UK - May 2016

                                                                                            £2,195.00 (Excl.Tax)