Know what puts people off financial advice and get ready to change their minds
The financial benefits of expert advice have been proven in various studies. Most memorably, with the study from the International Longevity Centre in association with Royal London, which revealed that those who sought financial advice were on average £47,000 better off after 10 years than people who weren’t taking any advice.
The emotional benefits have also had their share of headlines, especially in more recent times when financial wellbeing has become a hot topic. Talking to a financial adviser helps people feel more control over their finances, confident about the future, and better equipped to deal with life’s surprises.
But not everyone understands the benefits of taking financial advice and resist seeking expert help, even when they can afford it. Now another report, again from Royal London, has looked at reasons for the advice gap.
Read on to learn more about those reasons and what action you can take to help encourage people to rethink their resistance to seeking advice.
Only 26% of the country seek professional financial advice
With only 26% of Brits seeking professional financial advice, almost three-quarters of the British population miss out on the value and peace of mind it can provide.
This accounts for 39 million adults who aren’t benefiting from any form of help or guidance around looking after their financial affairs.
These numbers indicate just how wide “the advice gap” really is.
Customers with £10,000 may need some form of professional guidance
Late last year, the Financial Conduct Authority (FCA) released a paper suggesting that people with £10,000 of investible assets may need to seek professional guidance to help them manage their finances.
Although pinpointing a universally acceptable life event or financial threshold when financial advice would be most relevant is difficult, a ballpark figure is helpful for understanding when customers may require support and who might be best suited to provide it.
There is a glaring disparity to solve
The Royal London research found that advisers would expect prospective clients to have far more money available to invest before they’d be able to consider taking them on as a client. Revealing that potential advice customers would need around £48,600 to invest; £38,600 more than the sum suggested by the FCA.
Worse still, 20% of advisers surveyed wouldn’t accept a client with less than £100,000.
While it’s wholly unnecessary to emphasise the size of the problem, the research also revealed that 41% of advisers have turned clients away, or actively chosen not to follow up with prospects who didn’t have enough money to invest.
These revelations effectively disqualify many millions of customers from being able to access paid professional advice.
6 main obstacles that stop people seeking professional advice
1. Too expensive – 47% of non-advised people perceive advice as too expensive, despite the fact that 40% of these people have no idea what an adviser might charge.
2. They believe they’re fine looking after their own finances – 35% of non-advised customers don’t believe advisers can offer them anything they can’t take care of themselves. This is in direct conflict with prior research, which showed advised customers felt both more informed about their financial situation and were also financially better off.
3. Lack of trust – 29% of non-advised people don’t feel they can trust a financial adviser or don’t know how to find a good one. Encouragingly, 27% would be likely to see an adviser if they were prompted with more information about services provided.
4. Never considered it – 22% of people have never taken expert advice because it’s not something they considered they needed.
5. Dislike talking about money – 17% of non-advised people are either too proud or embarrassed to discuss their financial situation with someone else. 32% said they would find financial advice more appealing if they could access it entirely digitally.
6. Don’t imagine it’s for people like them – 15% of non-advised customers think their finances are too simple, or that financial advisers are interested in people with more wealth. However, 31% of respondents in this group have more than £50,000 of investible assets.
To close the advice gap, we need to address lack of awareness
A lack of awareness around financial advice, the services on offer, the costs involved and benefits that can be gained all need addressing if the gap is going to close.
The research showed that 1 in 4 people are open to taking financial advice once they have a better understanding of what is involved. This adds up to around 1.5 million potential new customers.
It’s necessary for the industry to dispel some of the myths that have been highlighted. Working within the industry, the benefits of advice are clear, but we’re going to need to convey this better to more people to encourage them to seek expert guidance around their financial affairs.
We need to start thinking about how we, as an industry, can start to close that knowledge gap. By doing so everyone can benefit. Advisers will increase their client base and customers will improve their awareness of their finances, grow their wealth, and gain peace of mind knowing that, should the worst happen, they have the right protection in place.
How AdviceBridge can help you grow your business and reduce the advice gap
The AdviceBridge platform helps financial planners and advisers efficiently and cost-effectively deliver a personalised service to clients for whom a full financial planning service isn’t viable.
The white-label app gathers personal and financial information from the client and digitises many of the manual, time-consuming processes, allowing you to focus on the relationship instead of admin, research, or reports.
AdviceBridge integrates seamlessly with existing software and significantly improves your business. It’s intuitive and easy to use for you, and your clients. And, because it makes financial planning less time-consuming and more affordable, it can actively help your advice firm become more profitable.
Get in touch
If you want to find out how AdviceBridge can help you grow your business, please get in touch. Email email@example.com or call us on 020 3925 3850.