Are independent financial advisers (IFAs) doing enough to convert people to the cause?
It seems not given a Royal London research paper that shows only 26 per cent of the country seeks professional financial advice.
In total, 39 million adults in the UK currently opt out.
The phenomenon is referred to as ‘the advice gap’.
Albeit, arguably, there are many financial ‘gaps’ that need resolving from the retirement savings gap to the protection insurance gap.
The pandemic has exposed many of these in ways that no one could have anticipated. However, the kind of events that have affected people over the last 12 months are the kind of events that affect families all the time.
Royal London claims that, on average, those who do take advice are £47,000 better off after ten years, while talking to a financial adviser helps them feel more in control of their money, confident about the future, and better prepared to deal with life’s shocks.
So, what is putting people off?
The report lists six main barriers:
- It’s too expensive – the biggest turn-off even though many have never thought to find out what an adviser might charge.
- It isn’t for someone like me – 15 per cent of the non-advised feel their finances are either too simple or that advisers are only interested in customers who are wealthier than them.
- I can look after my own money – some think advisers offer nothing that they can’t take care of themselves.
- It isn’t something I’d thought about – they simply haven’t considered it.
- I don’t trust advisers – applies to a worrying 29 per cent of those polled or they don’t know how to find a good one.
- I don’t like talking about my money – those who are either too proud or embarrassed to speak to someone.
Royal London found that 7.1 million, mostly women and young adults on low incomes, feel entirely disengaged; another huge segment are anxious about their money, fret the most about being able to cope financially when they retire, but think advice is too expensive; then there are 10.5 million who are the most confident when it comes to looking after their money, feel in control of their finances and determined to do their own thing; and finally, there is a group who don’t understand what advisers do, or how they could help.
Meanwhile, millions are deliberately ignored because the cost of regulation stops advisers taking on less affluent clients.
On average, £48,600 is the minimum before many advice firms would touch you. Indeed, 20 per cent of advisers said their firm would not take on a client with less than £100,000.
Here at Eastcote Wealth Management we don’t have a minimum investment amount as such. We tend to look at things in the round.
For example, when young people are starting out in real life, they may not have much in the way of savings or spare income, but they will have a need for mortgages and protection plans (life assurance, income protection, critical illness cover).
Also, a large number of our younger clients come following a referral from an older relative who is already with us.
It is also important for advisers to look at the broader picture. The person starting out on their career may be the successful businessperson or professional of the future.
Suggestions for countering the ‘advice gap’ include promoting free government guidance services, developing digital solutions that will allow advisers to scale up and deliver support to more customers, finding ways to demystify the world of financial advice, and improving financial education at the grass roots and in schools.