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First consumer research: Clients remaining loyal to advisers post-RDR

NMG Consulting examines consumer attitudes to the RDR and finds more investors likely to consider advice.

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Research suggests consumers continue to believe in the benefits of using a financial adviser post-RDR, with many investors more likely to consider advice than they were previously.

NMG Consulting has carried out the first wave of its new Investor Census, which monitors consumer attitudes to the RDR and the impact the reforms are having on consumer behaviour. It has based its analysis on online interviews conducted in April with 1,000 mass market and high net worth investors holding at least £10,000 in investable assets. The sample includes roughly the same amount of advised clients and non-advised consumers.

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NMG explained the requirements under the RDR of adviser fees and higher qualifications, then asked consumers whether they would use an adviser in future.

Of the 523 respondents who had an adviser, 98 per cent said they would continue to receive advice. Of the 201 who had stopped using an adviser, 68 per cent said they would now move to advice, while of the 280 who had never seen an adviser 46 per cent said they would move to advice.

The research shows 80 per cent of those who would continue to use an adviser in future and 86 per cent of those who would move to advice believed it was crucial for their adviser to be independent. Advisers that came recommended or held chartered status were also important criteria for consumers in choosing their adviser, but to a lesser extent.

The majority of consumers, both advised and non-advised, felt the key parts of the advice process worth paying for were a recommendations report and implementation.

When it comes to paying for advice, 47 per cent of those who plan to move to advice and 35 per cent who plan to continue getting advice would be most likely to pay the adviser direct. A further 17 per cent of prospective clients would have the adviser charge deducted from the investment, compared to 37 per cent of advised clients.

NMG analysed its findings and categorised consumers’ attitudes to paying for advice into four groups: dedicated direct users, who would arrange all future investment products without advice; advised clients who would also use other channels; consumers who do not have an adviser currently and would use several channels to buy investments; and dedicated advice users.

Based on its sample, direct users account for 20 per cent of consumers, 38 per are advised “multi-channel” clients, 28 per cent are currently non-advised multi-channel users, and 11 per cent are dedicated adviser users. The remaining 3 per cent are not planning to take out financial products in future.

The research shows 71 per cent of dedicated advice users are confident advisers are acting in their best interests. Perhaps worryingly, 39 per cent of dedicated advice users say they have a good understanding of the cost of financial advice, but NMG says this may improve over time as disclosure around costs improves.

The research also suggests advisers may face an uphill struggle if they believe prospective clients will willingly relinquish all control over their investments.

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Some 88 per cent of non-advised multi-channel clients said they would always do their own internet research before seeing an adviser, and 77 per cent said they would only see an adviser for complex products and handle other investments by themselves.

Attain Wealth Management managing director Gordon Crothers says: “If clients have been stung in the past by a previous adviser, they do not have the confidence to trust an adviser completely. Hopefully an understanding of what the RDR changes mean will reignite consumers’ interest in dealing with advisers.”

Clearwater Financial Planning managing director Duncan Carter says: “Those who seek out advice do so because they need it or they value it. There is still mistrust of advisers, and we would be naïve to think otherwise. There will always be a group of people that do not seek advice, which may be down to trust, cost or general inertia. I think it will take a while for the public to get their head around the fact that advice is not solely about pushing products.”

Investment Quorum chief executive Lee Robertson says: “It used to be the case that we as advisers knew everything, and the public knew nothing. It is right that people challenge their advisers, just as they would challenge their doctors or their accountants.

“For those that are confident enough to self-direct, I wish them every luck. But there will be those who want the extra assistance, the confidence of working with someone who knows their way around the market, who understands the complexities of tax planning. As we go forward I expect there will be more of a “pick and mix” approach, where self-directed investors come to an adviser for complex planning or an issue they are less familiar with. What the RDR has delivered is a way for investors to become more engaged and involved with the advice process.”

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. Further evidence that the doomsayers were wrong.

    RDR killed the banks. IFA firms have adapted well and can thrive. Restricted advice was a red herring, most small firms have stood up to commercial vested interests and continued to be independent.

    As ever, IFAs have proven adaptable.

  2. “Passengers still loyal to lifeboats after iceberg accident” SS Titanic

  3. I know what my clients are telling me and actually, that’s all that matters…But it is not good!

  4. @ Anon 08:43

    Spot on you are so right. Previous research going back years and often relied on by the regulator merely looked at those who never took advice – and were never likely to. No wonder they got the results they were looking for.

    Those who engage do value what we do and are overwhelmingly loyal. In the current financial mess it is hardly surprising that more will now seek us out. There is a correlation between the numbers seeking advice, low interest rates and high taxation.

    We are not merely any port in a storm; we are the ONLY port in the storm.

    What Garry Heath is on about I have no idea – I never was any good and cryptic crosswords.

  5. I wonder if this is from, the same people that gave us the infamous ‘Australian Survey’ or the one that FSA ‘proved’ commission bias ??

    We’ll see won’t we – the proof in the pudding and all that.

    RDR directly reduced the advice/savings/pensions gaps there’s a thought !

    Don’t hold your breath

  6. And what about the 1/3 that have stopped using advice ?

    The move to advisors is easily explained by the fact they there is no bank based alternative.

    Lies damned lies and statistics !

    What about the 50 odd % who don’t use advice.

    The IFA who moves to take the middle ground and stops getting up themselves with their HNW clients will clean up !!!

  7. Soren Lorenson 21st June 2013 at 9:52 am

    Let’s not get too excited.

    We’re only six months in. Many clients will have had little or no contact with their adviser who will still be being paid by trail commission.

    For the majority of clients, to date, little has changed.

  8. Well I can only speak for myself, and our clients have remained loyal and we have begun moving them to advisor charging, and so far no real problems, we’ve just explained what the changes are about and why we have to do them.

    All those people that tried to frighten me last year clearly didn’t tell our clients! Nor the new ones we have taken on in 2013.

    And I have literally no idea what Derek Gair is on about when he talks about the “pensions gap”…the last 6 months have seen more people join a pension scheme than any 6 month period in history, a trend that will continue as auto-enrolment covers all companies within the next 3 years or so. What can he mean?

  9. @ IFA

    I wasn’t aware RDR and AE were linked !

  10. @ Anon 12:44

    In many ways, they are. AE kills the argument put forward by RDR refusniks that the new rules will prevent pensions being arranged.

    It’s hard to claim RDR is creating a “savings gap” when millions of people are joining a pension scheme for the first time in their lives.

    Fortuitous for the F(S)CA? Maybe, but it’s true all the same.

  11. Could someone go tell Nic Cicutti who is still churning messages about regaining trust.
    Well Nic here is a clear message from our clients: We never lost their confidence!

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