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Over half of consumers won’t pay for advice

Over half of consumers may not be prepared to pay for financial advice, according to research from the Association of British Insurers.

The ABI research asked over 2,500 people about their attitudes to financial advice.

It found a third of respondents thought full financial advice would cost up to £300, while the ABI puts the cost of a full financial advice service at an average of £670.

The trade body says the research demonstrates the need for a simplified advice model.

ABI acting director of life and savings Helen White (pictured) says: “The results of our research send us a strong message about what consumers need to fill the gap between paying for full financial advice and having none.

“For the RDR reforms to deliver good outcomes for consumers and the industry we need to both convince sceptical consumers that full advice is worth paying for and also come up with a model of simplified advice for those consumers who cannot afford or do not need full financial advice.”


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There are 21 comments at the moment, we would love to hear your opinion too.

  1. Simplified advice is a disaster waiting to happen. As soon as something goes wrong (which it will) customers will look for someone to blame.

  2. How can advice be ‘simplified’?

    It defies all logic, sums up the ABI…

  3. …..but half will??

  4. Simplified Advice blah blah blah. Simplified Products blah blah. CAT standard blah blah. Stakeholder blah blah.

    Nobody to sell them, nobody will buy them. Savings gap increases. Waste of time and money. Well… someone is making money out of the magic roundabout.

  5. Just imagine what will happen post RDR with less “advisers” charging more and more in order to pay for the increased costs of regulation. Well done FSA

    A minority of highly qualified ( not Level 4) expensive advisers dealing in complex advice will thrive the rest……

    The public will basically have to chose between the banks and dealing direct. advice will not be an option.

  6. Context is everything, without knowing how and what respondents were asked, this information is inconclusive. As with most aspects of financial services, most people want to ignore the painful truth that at some point someone has to start paying.

  7. The trade body says the research demonstrates the need for a simplified advice model.

    No it demonstrates just what a devastating effect the RDR will have. Still who cares, certainly not the FSA!

  8. Will some-one please open thier eyes and sort out the whole ***!@? mess.

    DC time to step up to the plate

  9. What, you may ask does the ABI know about giving advice? They produce savings and investment products which are of little value as we can replicate them ourselves on Platforms. They DO provide protection products and in 30 years I haven’t seen a circumstance in which a buyer is able to successfully get the right Life, CI or PHI or for themselves without help on choosing cover level, how the policy should be written and who teh best provider is in terms of cost and wordings. This advice can’t be simplified or made subject to some sort of expert system which can be operated either by teh buyer themselves or an inexpert intermediary. It doesn’t work. The Regulator can’t expect to have successful outcomes from anything other than a process which takes account of all of the client’s circumstances and needs and of the suitability of the available cover. It’s as simple as that-in other words it’s not simple at all. Compare it with any other field in which advice is required for a successful outcome for a consumer of services. Would you be happy presenting your medical problems to an adviser who only has a low level of expertise and a limited range of solutions? It may be that the FSA have to measure the effect of their compliance regime on the availaibility in the UK of sound independent financial advice. Simplified advice might mean simply trusting IFAs to look after people well and to provide a caring service. The regime the FSA has steadily created leaves IFAs having to document absolutely everything we do to a much greater extent than say doctors or lawyers do-it is that weight of proving to an inspector that we have done absolutely everything we should have done according to their book in the right order and recorded in the right manner that is the problem–you can’t solve that unless we are trusted to get on quickly with jobs instead of having to compile auditable files for each and every bit of work we do–simple or not. I would be able to give an awful lot more advice if I didn’t need a vast file for every bit of it and the quality would be fine.

  10. nobody is surprised by this apart from the FSA who are in denial…..I can almost envisage the public lining up at my door to get advice because they pay by fee which eliminates product bias. It’s a complete sham and the only winner here will be the great minds at the FSA who have simply justified their jobs! It is impossible to simplfy advice….people either have advice or they don’t. My guess is that at least 50% will choose to ‘transact’ online rather than take advice they have to pay for. The good news is that the FSA fines should tumble because there will be very few advisers left to fine and I can’t see people complaining to the FSA because they gave themselves incorrect advice online! Like Anonymous said earlier ‘nobody to sell, nobody will buy….savinds gap increases…great outcome!

  11. This research should have been conducted years ago, it really is closing the gate after the horse has bolted.

    The only good to come out of this research is that it endorses the sentiments that IFAs have been expressing in these columns for years. It is a shame that these have previously fallen on deaf ears.

    Well the day of reckoning is nigh………..

  12. it would be interesting to see what percentage of staff at the FSA would pay for advice…that would be a good acid test…my bet is it would be very low. Who cares certainly not the FSA…if they did they would have completed more consultation instead of launching something not even the public want! To the guy above who said paeopl need to wake up to the fact that someone is going to have to start to pay! Clients already pay through the charges which are hugely transparant….you have to disclose commissions etc about 5 times during the process! All that commission does is create a factoring system for fees, much in the same way as buying a car on HP (with no commission disclosure!)..I don’t see the FSA trying to stop HP on cars and forcing people to buy their cars with Cash. I agree that the current commission structure needs to be looked at but the public at least deserve a choice…Fees of commission spread of a number of years! Another FSA bodge job!

  13. £670 for full advice – Where did they get figure from – a bankassurer or an insurers direct sales arm I would suspect.
    Try asking a good IFA firm what they would charge for a full financial advice service.
    I thing the ABI are again devaluing the cost of true impartial advice

  14. As far as I can see the figures aren’t even explained in this article. Are clients prepared to pay £300 per hour or just £300? What is this full financial advice and what lunatic is prepared to charge just £670 for 8 hours work, fsa fees, fos and pi, as well as associated risk. I heart the ABI. Don’t rise to the bait…wait, I just have…DOH!

  15. Ian Jones & Associates Ltd 13th April 2011 at 7:01 pm

    Small insignificant piece of research from the ABI promoting their own interests.However, at least it can be classified as research in comparison to the OZ (10 years ago) one quoted by Hector Sants as justification for the RDR.

  16. Another interpretation might be that many members of the public would not be willing to pay a fee up front for the full value of the advice.
    Now if only there was a way they could spread the cost of that advice over a preiod of time, perhaps over 24 months. How that might work, could there be a way for the adviser to factor their fee and the cost of that fee then be paid by the consumer in instalments?
    Maybe we could commission a study…
    Perhaps the FSA could think of a name for it – ?
    How about contingency fees, or consumer agreed remuneration. No wait a minute – Eureka – let’s call it commission … No – too intelligent. Let’s annihilate the industry and remove the one profession which encourages saving, that’s a much better idea, at least it is if you are Hector Sants.

  17. Most IFAs have already done their own research with their existing clients- and we have known this answer for at least two years, but nobody asked our opinion. I’m already out!! My ex clients are like sheep wandering the Moors without a shepherd. Many coming up to retirement, but still ring me for guidance, but will not pay a fee, even for such important issues.

  18. Over half of consumers will not be prepared to pay for financial advice, according to research from the Association of British Insurers. The ABI research asked over 2,500 people about their attitudes to financial advice. NB: This research is far in excess of any research conducted by the FSA.

    The ABI represent many porr product providers no longre suported by IFA and who by definition would benefit by restricted or tied advice where there products can be sold by a captive sales force to an unsuspecting public.

    Have you noticed how in spite of the evidence of their own survey the ABI do a double summersault in order to avoid telling the truth – and the truth is that the basic premise behind the £1.7b costing RDR is that consumers will not pay fees for advice! RDR should remain as it was intended: an after dinner speech by a retiring FSA official keen to leave the industry with a going away present.

    Consumers will not pay to be sold an intangible product for an event yet to occur. Just looks at another historical example where the same basic mistake was made – Stakeholder pensions!
    Stakeholder pensions failed. Only around 4 million stakeholder pensions have been sold
    since 2001 mainly inflated by block transfers. We were told at the time that consumers wanted to pay for advice and distributions costs were removed for pension products. As a result stakeholder pensions failed against their original objective of spreading pension membership among lower earners. The government removed distribution costs and forgot that this would also remove distribution.

    And here we go again. RDR is a £1.7billion mistake that will wreck financial services and destroys Europe’s most successful distribution network, the independent adviser.

    Mark Hoban MP needs to wake up and smell the coffee!

  19. Consumers may not be prepared to pay a fee for all services provided but, in my experience, a steadily increasing proportion of them are prepared to pay a reasonable fee in the range of £100 to £300 for a pre-sale report and recommendations. Remuneration thereafter can be on the basis of either a further fee or by way of CAR.

    If you don’t charge a fee for your pre-sale work (and I refuse to do it without one), then all you’re really doing is pitching speculatively for a sale, on which you may or may not get paid weeks or possibly months down the line sufficient commission to cover the cost of your week. That, to my way of thinking, isn’t a very professional business model.

  20. The ABI’s survey (Consumer Survey 2010 Q4) is based on fairly flimsy data. For starters their own numbers add up to 101% which is always amusing for a financial organisation. Anyhow, the survey to which you refer is based upon a sample of 48% full time workers (30 hours a week). A staggering 39% were technically not working – unemployed, students or retired or “other not working”. The remaining 14% were largely part-time workers. So by my estimate, around 53% were either not working or part-time. My massive assumption is that those people are unlikely to have significant funds or income and may actually not need much advice anyway. So asking these people how much they would pay for advice is a pointless exercise.

    I have to admit that I’m still puzzled by IFAs that think their clients won’t pay a fee. I have charged fees since 1999 and those that won’t pay a fee aren’t clients. Sure my fee model has had to alter and evolve – but it’s simply not true to say that people won’t pay for advice. Those that value it will, it is those that cannot afford a fair fee that have the problem and a solution is inevitably best left to the market place to resolve.

    As for the FSA, well they offered to pay £250 towards a fee charged by an IFA to staff in relation to advice about their closure of their own final salary scheme and move to a DC scheme. So presumably the numbers of those taking up this offer are easy enough to determine by a journalist keen to actually investigate something thoroughly.

  21. I agree with Dominic Thomas. From clients who won’t pay a fee, at least for your pre-sale work, you’ve simply got to ask yourself why, then write them off and walk away.

    Without exception, in every single instance in which, for one reason or another, I’ve been persuaded to waive my fee for the pre-sale work and done it anyway, no business has resulted.

    Last week I visited some prospective clients seeking advice on an old, small-value PP and a Low Cost Endowment. After all the usual first-meeting formalities, I stated that my fee would be £200, to which the man replied “We were hoping you could give us the advice this evening” to which I replied “What ~ free of charge?” to which he replied “Yes”, the cheeky bastard. And that was the end of that.

    So ask yourself this: “Am I professional, whose services warrant payment for the work I do from the end of the first meeting onwards or am I just someone trying to flog a product for commission?” Because, when all else is said and done, that’s what it comes down to, doesn’t it? And if the client who’s reluctant to pay even a nominal fee gets the same response from every other firm he approaches, eventually the message may start to get through that we’re a profession rather than a product-peddling industry.

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