Advisers and consumers remain unconvinced by the Financial Conduct Authority’s ‘targeted support’ proposals, a new study by the lang cat has revealed.
In response to the FCA’s proposals for financial service providers to offer targeted support to consumers, such as how to access retirement savings, only 13% of consumers said they would find this type of support valuable and act on any instructions given from an investment provider.
This rises slightly for pension providers (17%), although around one in four consumers raised the need to trust providers before considering suggestions from anyone.
Advisers are similarly sceptical about the proposals for targeted support, with one in four disagreeing that they’ll have a positive impact and may even confuse consumers. Despite this, half of advice firms said they are likely to offer these services once the regulation has been laid out.
The study highlighted the ongoing advice gap with just 9% of people benefitting from professional financial advice. This is due to overlapping issues of confidence in the industry (31%) and a failure to understand the positive impact advice could have on their finances (33%), the lang cat said.
Meanwhile, two thirds of adviser businesses said regulation is making it harder to serve less wealthy clients. Half report stopping services with ‘accidental advice gap’ clients making up an average of 11% of their customer base and rising to 17% for smaller firms.
However, advisers see opportunities through technology for supporting clients with simple needs. When asked about the potential to offer advice services through digital channels, over 55% said these would expand their customer base with 30% able to service less wealthy clients.
The study also showed some interest from consumers in simplified or pay as you go advice models, with 57% of respondents either fairly or very interested in advice for one-off type events such as arranging a will or mortgage.
Mike Barrett, consulting director at the lang cat, said: “Just 9% of the population has benefitted from paid for advice over the past two years and as an industry, we all aspire for that figure to grow. Despite the headline, there is a lot to be positive about. The fact that an overwhelming 91% of those who took advice found it helpful, shows levels of customer satisfaction that any other profession would dream of.”
However, Barrett said two areas of concern remain; a lack of awareness among the majority of the population as to the benefits of financial advice and a focus on wealthy individuals over 50 edging towards retirement.
Barrett added: “This isn’t a criticism of the advice profession, the need to service this group is entirely logical and sensible. However, the advice gap is most pressing for those who fall outside of this segment, and we believe there is value in understanding the scale of the problem. Only then can we figure out what interventions, if any, are needed so that we can start to tackle the advice gap once and for all.”
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