Demand for ad hoc advice growing

11 March 2021

Advised and non-advised clients are increasingly viewing ad-hoc advice as valuable, new research has shown, but advised clients are more confident of achieving their financial goals. 

Embark’s Investment Confidence Barometer found that 85% of advised clients consider ad-hoc advice as valuable, ahead of regular nudges and updates by email (84%) and financial health-checks when facing major life events (81%).

The younger generation was found to be more in favour of ad-hoc options, with 44% of 35-44 year olds considering this element to be ‘very valuable’ compared to 35% of 55-64 year olds.

Meanwhile, one in three (33%) investors without an adviser has considered seeking advice since the Covid-19 crisis began and almost three quarters (74%) intend to seek financial advice in the future. Of those intending to seek advice further down the line, nearly a quarter (22%) said that paying for it on an ad-hoc basis would be their preferred model.

Despite this, recent FCA data revealed that more than 90% of new clients are paying ongoing advice fees, up from 70% in 2019.

Phil Bungey, chief operating officer, Advance by Embark, said: “Can we envisage a future where some advisory businesses are able to offer a menu of full advice, guided services and execution only? Time will tell and a lot will depend on the sophistication of firms’ preferred platforms but I think this is a fairly clear message from the market that a broader range of flexible adviser services would be welcome.”

Satisfaction levels 

Embark said its Barometer also showed service and delivery to be critical, with advisers overestimating the standard of the communication they have delivered to their clients since the start of the pandemic.

Over four fifths (82%) of advisers said they were satisfied with their overall offering, compared to 71% of clients. The biggest satisfaction gap was for online meetings, with which 86% of advisers were satisfied compared to just 64% of clients.

However, virtual meetings still fared better than some other forms of communication, with just 61% of clients satisfied with text message and 59% with letter.

Sara Wilson, head of platform proposition, Embark, commented: “The move to virtual meetings, particularly in sectors where clients appreciate the value of an ongoing two-way dialogue is an exciting development. Up until last year, financial advisory services have been considered an in-person and on-paper industry but advisers and their clients have very quickly shown this is no longer the case.

Of interest is the forward-looking view: by and large, both clients and their advisers declare they are more than comfortable to continue having a mostly virtual relationship – not forgetting, of course, that not all clients are the same and that some will always prefer to meet in person. This suggests a focus on digital delivery would be a wise investment for advice firms.”

Investor confidence

Embark’s research also showed falling levels of confidence among unadvised investors since the onset of Covid-19.

Prior to the pandemic, 70% of investors were confident they could deliver their financial plans without an adviser, but this figure has since dropped to 60% with one in five (20%) now not feeling confident about delivering their financial plans.

The impact of advice on investor confidence was starkly exposed during the stock market crash between February and April 2020. Only 43% of investors without an adviser were confident in their investment approach during this period, while the figure rose to 65% among advised clients.

Embark warned that a lack of confidence could have a marked impact on investment behaviours and outcomes, with emotionally-led decisions costing investors an average 3% per year pre-Covid, according to research by Oxford Risk. During high periods of stress, investor losses can rise to about 6-7%.

In contrast, over a quarter (26%) of advised investors are much more confident that they will achieve their long-term financial objectives than before the pandemic began, with only 8% feeling less confident.

Retirement planning

Across both advised and unadvised investors, Embark’s Barometer found a lack of confidence in the likelihood of having enough money to meet retirement plans.

Only a quarter (24%) of advised investors felt very confident they will have enough money to meet their retirement plans, dropping to 18% among unadvised investors.

Just over one in 10 (12%) of unadvised investors said they felt very confident that their investment portfolio will grow sufficiently to provide the money to meet their needs post retirement, while 25% of advised investors felt the same, while 38% described themselves as ‘somewhat confident.’

Meanwhile, advisers thought that just over a third (37%) of their clients will have enough money to fund their retirement plans.

Going forward, nearly half (49%) of 35-44 year olds surveyed without an adviser said they were considering seeking advice.

Bungey added: “Our Barometer has shown that investors with an adviser have greater confidence in their ability to retire when they want and to be financially secure in retirement. It’s clear that a key differential is the role that advisers play in the management of their clients’ investment portfolios and the confidence that this brings.

“The ability of advisers to instil that confidence is a valuable attribute, particularly given the uncertain times that we are living through. It is an encouraging sign that many unadvised investors are considering seeking financial advice, and that, in particular, younger investors are looking to ensure they are as prepared for the future as possible.”

Professional Paraplanner