Attitudes towards financial advice

• Context
• The study
• Key findings
• Points to consider

Context

Getting good quality financial advice is vital for consumers and is typically sought to help with investing for the future or choosing a product such as an insurance policy or mortgage. However consumers don’t always distinguish between guidance and regulated advice, and when they do pay a regulated adviser, they sometimes get advice that isn’t suitable for them. Over the last five years, the Financial Services Compensation Scheme (FSCS) has declared more than 330 firms in default who were offering advice – this means that there was at least one valid claim against the firm, where a former customer was eligible for FSCS compensation.

The study

The FSCS is an independent body, funded by the financial services sector, which pays out compensation when financial firms go out of business. The goal of the research is to help FSCS and stakeholders across the financial services sector to identify gaps and opportunities to provide consumers with accurate information about FSCS protection. The study comprised an online survey amongst a representative quota sample of 2,000 UK adults aged between 18–75, conducted by Ipsos between the 10th and 13th August 2022. Survey data were weighted to the known profile of this audience.

Of the 2,000 UK adults aged 18–75:

• 1901 have financial products
• 1660 adults currently have savings or investments or a mortgage

Key findings

Key findings were as follows:

• Around a third (36%) of participants who had savings, investments or a mortgage had sought financial advice within the last five years – 41% of men and 32% of women.
• Almost a quarter (23%) who sought advice, but not from a regulated financial adviser, said this was because their savings and investments weren’t large enough, 23% also said it was because they already had enough information, and 22% said advice was too expensive.
• A majority (80%) of adults with financial products agreed that there should be affordable ways to access professional financial advice.
• Around a fifth (21%) of adults with savings, investments or a mortgage didn’t know how much money they would need to have at stake to make paying for regulated advice ‘worth it’ for them.

Overall, the report concluded that there is misunderstanding and confusion amongst some consumers about financial advice – what it is, what it isn’t, where to find it, and what value they may get from it. The authors stated that there are clearly opportunities to improve understanding and awareness amongst all demographics. This alone could increase the number of consumers accessing advice that could help them reach their financial goals.

Points to consider

• Methodological considerations: The report states that the survey used a representative sample and that the data were weighted to the known profile of the audience – adults aged 18 to 75. However, there is no further information about the metrics used to do so.
• Relevance: Highly relevant as it exposes a widespread lack of understanding of financial advice, which could be damaging to consumers’ ability to make good financial decisions.
• Generalisability/ transferability: This work is specific to the UK adult population and to the financial advice market in the UK.
• Applicability: This study will be mostly of interest to the FSCS itself and the financial institutions and industry bodies that fund the FSCS, provide products that the FSCS protects and advise consumers about those products. It will also be of interest to anyone involved in the regulations around financial advice, such as those in government, policy makers and regulators.