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UK Consumers and Financial Advice market report

"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
      • Report scope
      • Executive Summary

          • The market
            • Savings growth slows in 2017
              • Figure 1: Total retail savings deposits, 2007-17
            • Gross sales of unit trusts and OEICs rise by an estimated 26% in 2017
              • Rising inflation triggers first base rate increase
                • Figure 2: UK’s consumer price index, base rate and average weekly earnings growth, September 2008-September 2017
              • Falling savings ratio
                • Figure 3: Quarterly gross household savings and savings ratio, seasonally adjusted and at current prices, Q1 2013-Q1 2017
              • FCA publishes final report on asset management market study
                • Help to Save aims to improve savings activity
                  • The consumer
                    • Housing situation reflects big differences in savings
                      • Figure 4: Value of savings and investments, October 2017
                    • Standard cash accounts more popular than ISAs
                      • Figure 5: Savings and investment product ownership, October 2017
                    • Emergencies/unexpected events are the most common reason to save
                      • Figure 6: Saving priorities, October 2017
                    • Over half haven’t saved as much as they planned over the last year
                      • Figure 7: Attitudes towards managing savings, October 2017
                    • Online application and management are key for new customers
                      • Figure 8: Important factors when choosing a savings or investment provider, October 2017
                    • Benefits other than interest highlight a chance to personalise products
                      • Figure 9: Interest in new savings account features, October 2017
                    • Rising rates could lead to increased switching activity
                      • Figure 10: Attitudes towards the current savings environment, October 2017
                    • Ability to customise investments is important
                      • Figure 11: Attitudes towards the current investing environment, October 2017
                    • What we think
                    • Issues and Insights

                      • Majority are just trying to meet their savings goals
                        • The facts
                          • The implications
                            • Aggregation apps can offer more beneficial insights around savings behaviour
                              • The facts
                                • The implications
                                • The Market – What You Need to Know

                                  • Savings growth slows in 2017
                                    • Gross sales of unit trusts and OEICs rise by an estimated 26% in 2017
                                      • Rising inflation triggers first base rate increase
                                        • FCA publishes final report on asset management market study
                                          • Help to Save aims to improve savings activity
                                          • Savings and Investment Market Size

                                            • Savings growth slows in 2017
                                              • Figure 12: Total retail savings deposits, 2007-17
                                            • Cash subscriptions fall whilst stocks and shares rise slightly
                                                • Figure 13: Number of ISAs and amounts subscribed, segmented by component type, 2010/11-2016/17
                                              • Gross sales of unit trusts and OEICs rise by an estimated 26% in 2017
                                                • Figure 14: Retail sales of unit trusts and OEICs – UK-domiciled, 2013-17
                                            • The Savings and Investment Environment

                                              • Rising inflation triggers first base rate increase
                                                • Figure 15: UK’s consumer price index, base rate and average weekly earnings growth, September 2008-September 2017
                                              • Some providers failing to pass on increase to customers
                                                • Falling savings ratio
                                                  • Figure 16: Quarterly gross household savings and savings ratio, seasonally adjusted and at current prices, Q1 2013-Q1 2017
                                                • Proportion who say they have saved has fallen
                                                  • Figure 17: Trends in savings activity, June 2012-August 2017
                                                • A fall in confidence could boost saving
                                                • The Regulatory Environment

                                                  • FCA publishes final report on asset management market study
                                                    • Government to publish long-term strategy for asset management industry
                                                      • MiFID II comes into force
                                                        • Help to Save aims to improve savings activity
                                                          • Cash savings market study
                                                          • The Consumer – What You Need to Know

                                                            • Housing situation reflects big differences in savings
                                                              • Emergencies/unexpected events are the most common reason to save
                                                                • Over half haven’t saved as much as they planned over the last year
                                                                  • Online application and management are key for new customers
                                                                    • Benefits other than interest highlight a chance to personalise products
                                                                      • Ability to customise investments is important
                                                                      • Value of Savings and Investments

                                                                        • A third have less than £500 or no savings or investments
                                                                          • Employers can do more to increase savings activity
                                                                            • Figure 18: Value of savings and investments, October 2017
                                                                          • Housing situation reflects big differences in savings
                                                                            • Figure 19: Value of savings and investments, by housing situation, October 2017
                                                                        • Savings and Investment Product Ownership

                                                                          • Standard cash accounts more popular than ISAs
                                                                            • Figure 20: Savings and investment product ownership, October 2017
                                                                          • One in five own an investment product
                                                                            • Stocks and shares ISAs offer an entry point for beginners
                                                                              • Figure 21: Savings and investment product ownership, by value of savings and investments, October 2017
                                                                            • Nearly half have two or more savings and investment products
                                                                              • PFM apps can make it easier to manage multiple accounts
                                                                                • Figure 22: Repertoire of savings and investment product ownership, October 2017
                                                                            • Saving Priorities

                                                                              • Emergencies/unexpected events are the most common reason to save
                                                                                • Figure 23: Saving priorities, October 2017
                                                                              • Young Millennials balancing short and long-term savings goals
                                                                                • More focus needs to be placed on saving for retirement
                                                                                  • Figure 24: Saving priorities, by generation, October 2017
                                                                                • 18-24-year-olds have fewer savings goals…
                                                                                  • …whilst 25-34-year-olds need help juggling their savings goals
                                                                                    • Figure 25: Repertoire of saving priorities, by age, October 2017
                                                                                • Savings Management

                                                                                  • Over half haven’t saved as much as they planned over the last year
                                                                                    • Figure 26: Attitudes towards managing savings, October 2017
                                                                                  • Two in five mostly manage their savings via mobile
                                                                                    • Figure 27: Agreement with the statement ‘I mostly manage my savings through mobile banking’, by age, October 2017
                                                                                  • PFMs need to offer the flexibility of people’s own spreadsheet designs
                                                                                    • Figure 28: Agreement with the statement ‘I use a spreadsheet to help me keep track of my saving and investing’, by savings and investment product ownership, October 2017
                                                                                • Choosing a Savings or Investment Provider

                                                                                  • Online application and management are key for new customers
                                                                                    • Figure 29: Important factors when choosing a savings or investment provider, October 2017
                                                                                  • Importance of brand means incumbent brands likely to retain share
                                                                                    • Higher-value savers will demand more
                                                                                      • Figure 30: Important factors when choosing a savings or investment provider, by value of savings and investments, October 2017
                                                                                  • Interest in Savings Account Innovation

                                                                                    • Two in five want product recommendations
                                                                                      • Figure 31: Interest in new savings account features, October 2017
                                                                                    • Benefits other than interest highlight a chance to personalise products
                                                                                      • One in four are interested in goal-based accounts
                                                                                        • Figure 32: Interest in new savings account features, by age, October 2017
                                                                                      • Consumers are open to more communication
                                                                                      • Attitudes towards Saving

                                                                                        • Rising rates could lead to increased switching activity
                                                                                          • Figure 33: Attitudes towards the current savings environment, October 2017
                                                                                        • Open Banking can help people to improve their savings activity
                                                                                          • Figure 34: Response to ‘I plan to save more over the next 12 months than in the last 12 months’, by agreement with ‘I haven't saved as much as I planned to over the last 12 months’, October 2016
                                                                                      • Attitudes towards Investing

                                                                                        • Ability to customise investments is important
                                                                                          • Figure 35: Attitudes towards the current investing environment, October 2017
                                                                                        • Most have not been put off by Brexit uncertainty
                                                                                          • Greater returns mean people still expect to move cash into investments
                                                                                            • Figure 36: Agreement with the statement ‘I expect to move cash savings into investments in the next 12 months’, by age, October 2017
                                                                                        • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                            • Abbreviations
                                                                                              • Consumer research methodology