Nearly two-thirds of clients had to proactively prompt their adviser for information about the Financial Services Compensation Scheme, a mystery shopping exercise has revealed.
In a series of studies commissioned by the lifeboat fund, it has found that awareness of the FSCS is likely to lead to less risky product choices and greater sales of regulated products covered by the scheme.
Advised clients are particularly likely to think the FSCS is important, but are also less likely to question the cost of that advice if they are aware of the FSCS’ protections.
However, only 23 per cent were aware of the compensation limit for pension claims, and 61 per cent discussed the scheme only when their client prompted them.
The FSCS has established a new working group from the industry to look at how information on the FSCS should be disclosed to consumers to see if a standardised format can be reached.
FSCS chief executive Mark Neale says: “It is clear that greater awareness of the protection that FSCS provides to retirees has an impact on product choice and on the risks they are prepared to take when planning their finances. It is key that providers and advisers make retirees aware of FSCS protection.”
In a sample of 1,500 over 50s surveyed by the FSCS, more than half used an IFA for a retirement product purchase, and 62 per cent said knowing about the FSCS would have influenced this decision.
The FSCS says its finding show telling people about the scheme acts as a prompt to consider paid-for advice.
FSCS chair Lawrence Churchill says: “The results of this research provide a clear indication of the need for firms to offer clear and accurate information about FSCS to their customers. This information will not only allow retirees to make more informed decisions about their pensions, but will increase their trust and confidence in the firms themselves. And that’s good for firms and for financial stability generally.”