the rdr and consumers - chartered insurance institute · the rdr and consumers the public’s views...

The RDR and ConsumersThe public’s views towards the retail investment advice market

February 2014

1 The RDR and Consumers: The public’s views towards the advice market

contentsContents3 Headline findings and methodology

5 The policy context: Was the RDR a force for good?

9 The public’s appetite for investment advice

– Whoseeksadvice:aconsistentpicture

– Barrierstoadvice:allthosesceptics

– Awarenessofchanges:moreworkneeded

– Perceivedadvicesubstitutes:theinternetiskey

15 RDR impact: trust, confidence and likelihood of taking advice

– Overallpublictrustandconfidence:improvementstillawaited?

– LikelihoodtouseadviceasaresultoftheRDR

– Advisedrespondents’reactions

– Difficultyfindinganadviser

22 Overall findings and implications

26 Appendix: Survey questionnaire and filtering


AcknowledgementsThisreportwasproducedandanalysedbythePersonalFinanceSociety,theUK’slargestgrouping

offinancialadvisersandrelatedroles.Giventheimportanceoftheseissues,andthefactthatthere

arealwaysdifferingviewstowardsthesamesetofdata,wealsosoughtanexternalperspectiveto

cross-checkourownviewsandconclusions.

SoweaskedNickHurman,afinancialservicesresearchandstrategyconsultantwithparticular

specialisminpensionsandinvestment,toexamineandanalysetherawsurveydataindependentlyand

inisolationfromourselves.

WehaveincludedNick’sviewsinseparateboxesthroughoutthetext,toclearlyindicatethedifference

betweenhisfindingsandourown.Insomecasestheboxesmightrepeatourownviews,inothercases

hemayinterpretadifferentfindingthatmightdisagreeortakeadifferentangle.

NickHurmanFCII,CharteredInsurer,isanindependentStrategyandChangeManagementconsultant

andhasworkedwithcommercialandpublicinterestclientssuchAEGONUK,Hewitt,theResolution

Foundation,theFinancialServicesConsumerPanelandtheEquityReleaseCounciloverthelastseven

years.Hehasaparticularresearchinterestinconsumers’engagementwithfinancialservices,developed

over25years’experienceinexecutiveroleswithinthefinancialservicesindustry.HeholdsanMBAfrom

CityUniversity(nowCass)andisaFellowoftheCharteredInsuranceInstitute.


headline findings and m

ethodologyHeadline findings and methodology

About this reportBackground: inDecember2013,weconductedanon-linesurveyofover2,000consumerstoassess

attitudestowardstheretailinvestmentandpensionsadvicemarketandrecentregulatorychangestoit.

Thiswasthethirdsuchsurveywecarriedout.PreviousoneswereinMay2011andJanuary2013.

Independent cross-check:thisreportwasconducted,analysedanddraftedbythePersonalFinance

Society.Tocross-checkthisanalysis,wealsoaskedNickHurmantoindependentlyanalysetherawdata

andpreparehisowncommentarywhichappearsinseparateboxesthroughoutthispaper.

Key messages• Scope of this report: thisreportdetailswithretailinvestmentadvicethatcoversinvestments,

pensionsandretirementissues.Respondentsinthesurveywereaskedspecificallyonadvicein

thisarea.

• Who seeks retail investment advice:66%ofthepopulationhadnotsoughtprofessionalfinancial

adviceonretailinvestments,pensionsorretirement.Thisechoeslastyear’ssurveywhichsaid67%

havenotdonethis,andthe2011resultof61%.Thesefindingsthatpre-datetheRDRintroduction

questionthewisdomthattheregulationitselfhasenlargedan“advicegap”.

• Barriers to financial advice:ofthosewhohavenotsoughtadvice,38%donothavethemoneyto

invest,nearlythesameaslastyear;16%thoughttheycouldnotaffordaprofessionalfinancial

advisertodiscussretailinvestmentsorpensionsissues,thesameaslastyear.Nearlyaquartersaid

theywouldratherself-adviseusingothersourcesofinformation,asmallerproportionthanlastyear

and19%saidtheyhadneverthoughtaboutreceivingadvice,slightlymorethanlastyear.

• Sources of information for the self-advisers:wefoundinternetsitestobethemainsourceof

information,followedbynewspapersandmagazines.

• Awareness of regulatory changes:thesurveyaskedabouttwoprinciplechangesintroducedinthe

RDR.Thishaddeclinedslightlysincelastyearforbothunadvisedandadvisedrespondents.29%of

unadvisedcustomersareawareoftheprofessionalismchangesdownfrom32%lastyear;whereas

knowledgeoftheremunerationrequirementshasremainedsteadyat35%.

• Advisers need to do more to access the unadvised:clearlytheMoneyAdviceServiceandtheFCA

arehavingalimitedimpactinaccessingunadvisedconsumers.Therefore,advisersneedtodomore

toreachthismarket.Givenhighimportancerespondentsplacedinwebresearch,advisersmight

considerincreasingtheiron-linepresence.


headline findings and m

ethodology• Trust and confidence in the sector:nearlyhalfofunadvisedandoverathirdofadvisedconsumers

saidtheydonothavetrustandconfidenceinthissector.Abouttwo-thirdstothree-quartersof

consumersthinktheirviewhasnotchangedoverthelastyear,andafifthofunadvisedconsumers

thinktheiropinionhasactuallyworsened.Thisclearlyindicatesthatthereismoreworktobedone

toincreaseconfidence.

• Likelihood of use advice as a result of the RDR:35%ofunadvisedrespondentssaidtheywould

dothis,aslightincreasefromlastyear.Thisisaverypositivefindingdespitethenegativepress

aboutdwindlingadvisernumbersandincreasedcostofadvice,andtheiroverallviewstowards

theadvicesector.

• This equates to nearly 5 million new customers: equatingtheproportionofunadvisedconsumers

tothewiderpopulation,itequatesto4.8millionnewcustomersspendingabout£3.8bninadviser

charges.Ifthesectorworkedhardertowinoverthetrustandconfidenceofespeciallythose

whothinktheycanselfadvise,thisnumbercouldincreasetonearly14millionnewcustomers

spendingover£10bn.

About the surveyThisyear’son-linesurveyinvolvedasampleof2,038consumersinEngland,ScotlandandWales

conductedbyPopuluson4–5December2013.Thesurveywasafollow-uptosimilaronesweconducted

inJanuary2013(2,010respondents)andMay2011(2,055respondents).

Thequestionnaireconsistedofsixteenquestions,ofwhichelevenweretrackingfromthepreviousyears

whilesevenwereentirelynewexploringnewlinesofinquiryintotrustandconfidenceintheadvice

sectorandlabellingofadvisers.Therewerealsosomeslightchangestothefiltering.

SeetheAppendixattheendofthispaperforfullinformationonthespecificquestionnaireandfiltering.

Furtherdetailsofthissurvey,andthepreviousones,areavailableuponrequest.


Justoverayearago,on31December2012,asetofchangestoretailinvestmentadviserregulationtook

effect,signallingtheendoftheRetailDistributionReview(RDR).Mostofthereformsfellintothreemain

categories:labellingofservice,namelythecriteriabywhichfinancialadviserscandescribethemselves

asindependentofproviderinfluence;remunerationincludingabanoncommissionreceivedfortransacting

certainproducts;andprofessionalism,theminimumqualificationnecessarytobeafinancialadviserand

requirementstomaintainthatknowledge.

Theconsultationandimplementationprocesssince2007hasseenmuchdebateoverwhethertheRDR

wasaforceforgoodinimprovingpublictrustandconfidenceinthissector.Consumergroupsthemselves

largelywelcomedtheprocessandthereforms.BothWhich?andtheFinancialServicesConsumerPanel

whohadlongexpressedconcernsaboutthequalityoffinancialadviceintheUK,commissionbiasand

successivemis-sellingscandals,welcomedtheregulator’sinitiativetofinallyimprovethemarket.1

Theysupportedmostoftheproposalsincludingthoserelatedtoprofessionalstandards.However,other

marketparticipantsincludingsomefinancialadvisersthemselvesquestionedtheproportionalityofthe

reforms,arguingtheymightbeasteptoofaranddriveadvisersoutofthemarket.

Asthisdebatereachedaheadinmid-2011,justasfirmswereabouttostartpreparingforimplementation,

wesoughttoassesstheviewsofconsumersthemselvestowardstheRDR.Avoidingsuchpolicyjargon

asthelabel“RetailDistributionReview”itself,weaskedrespondentsabouttheirviewstowardstwoof

thosethreemainsetsofreforms:professionalismandremuneration,inanattempttofillavoidpresented

bywhatwasmainlyanindustry-dominateddebate.ThesurveypublishedinMay2011revealedreasons

foralbeitcautiousoptimismthatthesechangeswouldactuallyachievetheobjectives.2TheninJanuary

2013,justastheRDRcameintoforce,wecarriedoutasimilarsurvey,whichalsoreturnedsomevery

similarresults.3

Wehavenowconductedathirdsurveyoneyearlater,tofirstassesswhetherthistrendiscontinuing,

andsecondtostartlookingatgeneralattitudestowardstrustandconfidenceintheadvicesector.Like

thefirsttwosurveys,wefocusedonprofessionalismandremuneration,butwealsolookedatlabeling.

However,wefeltthatthelatterissueissocomplex,anditwasnotcoveredinthefirsttwosurveys,

thatwedecidedtodevoteaseparatereporttoitwhichwewillpublishlaterthiswinter.Hopefullythis

researchwillhelpprovideaconsumerperspectiveoftheFCA’sownreviewoftheRDRlaterin2014.

The core changes Professionalism

Underthenewrules,retailinvestmentadvisersmustholdaqualificationatLevel4Diplomainthe

QualificationsandCreditFramework,equivalenttothefirstyearofauniversitydegree.Theywillalso

havetoholdaStatementofProfessionalStanding(SPS)toconfirmthattheyhavemetongoinglearning

requirementsandareingoodstandingwiththeirprofessionalbodyinrelationtotheirconduct.These

changesweremainlyinresponsetoconcernsexpressedespeciallybyconsumergroupsaboutadviser

conductand,givenproductcomplexityandimplicationsofpooradvice,knowledgeandoveralllevels

ofprofessionalism.

Adviser remuneration

Commissionanditsassociatedbiashaslongbeenaboneofcontentionwhenitcomestoconsumertrust

infinancialadvice.TheRDRhasresultedinanoutrightbanoncommissioninthismarket,infavourofa

separate,transparentandhopefullycomparable“advisercharge”thatseparatesthecostofadvicefrom

thecostoftheinvestment.

1 Seeforexample,FSAtakesbigsteptohelpconsumers–latestRetailDistributionReviewchanges,FinancialServicesConsumerPanelpressrelease,25June2009.Seealso,FinancialServicesConsumerPanel,ResponsetoFSACP09/18DistributionofRetailInvestments:DeliveringtheRDR,30October2009.

2 TheCharteredInsuranceInstituteandPersonalFinanceSociety,FinancialCapability:TheMoneyAdviceServiceandEducatingthePublicontheRDR,June2011.

3 TheCharteredInsuranceInstituteandPersonalFinanceSociety,TheRDRandConsumers:AResearchReportintoConsumerViewsontheFinancialAdviceRegulatoryReforms,February2013.

The policy context: Was the RDR a force for good?the policy context: w

as the RD

R a force for good?


the policy context: was the R

DR

a force for good?Responses from the market: the vast majority have got on and done itThevastmajorityoffinancialadvisershasactuallywelcomedtheRDRchangesandhasgoneonto

implementthem.InsixPersonalFinanceSocietymembersurveysconductedbetween2007and2010,

strongmajoritiesindicatedsupportforthelogicthatbetterqualifiedadviserdeliveredbetterserviceto

customers,andthattheRDRwouldleadtoamoreprofessionaladvisermarket.4Despitethispositive

responsefromthevastmajority,asmallbutvocalminorityhavearguedthatthechangeswould

bringaboutashortageofprofessionaladvisers,andthelimitedcoveragetheRDRhasreceivedinthe

mainstreampersonalfinancepresshasbeendevotedtothistopic.5

Sohowhavetheadvisernumbersactuallyplayedout?InNovember2011,theFSAfinallypublished

theresultsofadetailedanalysisofitsfirmdatabaseandarrivedatareasonablysoundfigure

ofabout40,500retailinvestmentadvisers.Thiscorrectedanymisunderstandingofhowmany

advisersthereactuallywere,andprovidedthemostrobustbaselinefigurefromwhichtoderive

a“before-after”picture.

TheythenusedthissamemethodologytoproducecountsinJulyandDecember2012priortoRDR

implementation.InJuly2013,theFCAreplacedthiswithamorerobustapproachofcountingSPS

holders,andtheydidthisagaininDecember2013.

FSA/FCA analysis of Retail Investment Advisers, November 2011–December 2013

Whiletherewasa20%declineinadvisernumbersbetweenNovember2011andDecember2012,

numbersseemedtohavesettledatabout31,200.Itistooearlytosaywhethertheadvisercountwill

increaseagain.

Itissimilarlytooearlytosaywhetherthepre-2012reductionwassufficienttocreateanyrealconsumer

accessissues,assomehaveargued.Suchanimpactcouldbedistortedormitigatedbythefollowing

quiterealconsiderations:

Plans to exit the market anyway

Asmallproportionwasintendingtoexitthemarketanyway,duetoretirementforexample.TheFSA

themselvesreportedin2011that5%ofadvisersplannedtoretireintheperioduptoDecember2012,

comparedtolessthan1%expectingtodosointhe2011survey.

4 PersonalFinanceSocietysurveysconductedbyErnst&Young.Samplesizes:Oct2007:800;Nov2007:1,300;Apr2008:860;Oct2008:800;May2009:700;Mar2010:1,300.

5 Seeforexample,MiddleBritainisbeingpricedoutofgettingfinancialadvice:thesituationcouldgetworsebeforeitgetsbetteraswatchdognewrulescomeintoeffect,byDanielleLevy,TheIndependent,Saturday4January2014;I’veditchedmyadviser–nowIusealow-costbroker,byRichardDyson,TheTelegraph,10August2013;Oneinfoursaversstrugglestogetfinancialadvice:largenumbersofinvestorsarenow‘pricedoutofadvice’,byKyleCaldwell,TheTelegraph,30October2013;andFinancialadvice‘gap’revealed,ExpressandStar,30October2013.

45,000–

40,000–

35,000–

30,000–

25,000–

20,000–

15,000–

10,000–

5,000–

Nov

11

–

Aug

12–

Jan

13–

Feb

13–

Sep

12–

Oct

12

–

Nov

12

–

Dec

12

–

Jul1

2–

Jun

12–

May

12

–

Apr1

2 –

Mar

12

–

Feb

12–

Jan

12–

Dec

11

–

Mar

13

–

Dec

13

–

Nov

13

–

Oct

13

–

Sep

13–

Aug

13–

Jul1

3–

Jun

13–

May

13

–

Apr1

3–

Nov 2011: FSAbaselineRIAcountusingRSConsultinganalysisofauthorisedRIAfirmdatabase:40,567

July 2012: FSAsecondcount:35,073

Dec 2012: FSAfinalpre-RDRcount:31,132

July 2013:FCApost-RDRanalysisofSPSs:32,689

Dec 2013: FCARDR1stanniversarySPScount:31,220



DR

a force for good?Advice was previously secondary to main business

Someadvisoryfirmsmayhaveoffered,ormayhavebeenoffering,retailinvestmentadviceasanactivity

thatwassecondarytosomeothermainbusinessactivity.Theymayhavedecidedtostopdoingthis

whentheregulatorrequirementsgotstiffer.

Providers shedding direct sales forces

Asignificantproportionmayhavebeentiedadvisersworkingforproviderssuchasbanksand

bancassurers,wholeftasaresultofthemsheddingtheirdirectadvicepropositionaltogether.Although

someofthesehigh-profileclosureshavebeenquietlyreplacedbyanotherproposition,alargereduction

inthedirectadvisermarkethasoccurred.However:

• oneofthebigissuesthattheRDRwastryingtoaddresswasproviderbiascausingconsumer

detriment:ofsalespeopleincentivisedtosellunsuitableproducts.Soarguablyitisnotsurprising

thatsomemajorprovidershaveoptedtoexitthisreputationalrisksourceandmovetowardsan

entirelyintermediatedchannel;moreover

• anecdotalevidencealsosuggeststhatmanyoftheseprofessionalshavestartedtheirown

businessesanywayasindependentorspecialistrestrictedadvisers.

Ceasing trading due to professionalism requirements

Thatleavesaproportionofadviserswhogenuinelydidceasetradingbecausetheydidnotmeetthe

higherprofessionalstandards.

Adviser remuneration issues

Turningtotheissueofadviserremuneration,therehasbeensomespeculationthatthismovetoa

moreup-frontchargingstructuremightactuallyrepelratherthanattractconsumers.Inamarketwhere

thecostofadvicehasbeenlessobviousforsuchalongtime,thismightbedifficultforsome,andthe

adviserchargewillvarydependingonthenatureoftheadvicegiven.However,withadvicecostingabout

£200–£500foraninitialfinancialreview,andmoredetailedjobslikeadvisingonalumpsumsuchan

inheritanceoranannuitycostingupwardsof£1,500,consumersneedtobetterunderstandthevalueof

adviceitselfforthismarkettowork.

ResearchbyGfKpublishedinAugust2013pointedoutthat34%ofactivemarketinvestorswhohave

usedafinancialadviserinthepastfiveyearswill“never”considerpaid-forinvestmentadviceinthe

future.6Thissuggeststhatuntilsuchanunderstandingembeds,theimprovementintrustfrommoving

toamoretransparentchargingstructuremighttakesometime.

6 RDR:Clientsaren’tseeingthevalueof“paidfor”advice,GfKPressRelease,5August2013.



DR

a force for good?

Previous surveys and new questionsInJune2011andJanuary2013,oursurveysassessedthepublic’sknowledgeoftheseRDRchangesto

theretailinvestmentadvicemarket.Inbothcases,abouttwo-thirdsofconsumershadneverreceived

adviceonretailinvestments,pensionsandretirementissues,andwefoundthatsizeableproportions

mightconsiderenteringthismarketgiventhereforms.Inthe2012survey,wefoundthatabout5million

newcustomerscouldbeintroducedtothismarketasaresultoftheRDRreforms.

Nowthatthechangeshavebeenimplemented,andamidstallthisnoiseaboutdwindlingadvisersand

risingadvicecosts,wedecidedthatitwastimetoundertakeathirdon-linesurveytoassessconsumer

viewstowardstheRDRandtheseissuesaboutaccesstothesectorandconfidenceinit.

Wehavekeptmanyofthequestionsfromtheprevioussurveystoallowtrackingacrossthesuccessive

waves,butwehavealsoaddednewquestionstoallowfurtherexplorationofissuessuchasaccessto

andtrustandconfidenceinadvisers.

Weacknowledgethaton-linesurveyshaveobviouslimitationsintheirrepresentativenessofthewider

population.However,itisnotourobjectivetoprovideadetailedanddefinitiveviewtowardstheexact

sentiments,insteadtoprovidesomeindicationofthepublic’ssentimentsintheseareas.

Nick Hurman’s view:ThisisthethirdwaveoftheCII/PFSresearchintoconsumerawarenessofthechangesarising

fromtheRDRandhowitaffectstheirviewsoffinancialadviceforpensionsandinvestments.

Theyhavekepta2,000samplesizeandresetsomeofthefiltering.Thisnotonlyincreases

theoverallrobustnessofthestatisticsbut,crucially,enablesmoresecureanalysisofthe

viewsofsegmentsofconsumers,suchasthosewhohaven’teverusedanadviserbutchoose

tobe‘self-advisers’,investingdirectlythemselves.


Nick Hurman’s view:Itisasignofthetimesthattwothirdsofrespondentssaytheyhaveneversoughtouta

professionaladviseronpensionsorinvestment.Thisnumberreducessomewhatforolder

respondents,buteventhe55–64groupwhoaremuchmorelikelytohavethemeansandthe

needtoseekoutadvicereportthatoverhalfhavenot.Sowhyisthis?

Overaquarteroftheadultpopulationthinktheyhaveinterestininvestingbutdon’tchoose

toseekoutanadviser.Thisrepresentsamarketalmostaslargeasthosewhoareorhave

beenusersinthepast.Sowhatkeepsthesepotentialusersaway?

Who seeks advice: A consistent picture66%ofthepopulationhadnotreceivedfinancialadvice.Thisalmostechoesour2011surveywhichsaid

67%havenotreceivedadvice,andtheJan2013resultof61%.TheFCAestimatesthisfiguretobe

about65–70%.Thefollowingfactorsinfluenceadvicetake-up:

• Age:thereisastronglinearrelationshipbetweenreceivingfinancialadviceandage.Aged25–34are

veryunlikelytohavereceivedadvice,whereasthosenearingretirementaremorelikelytohave.

• Gender: proportionallymorementhanwomenreceivefinancialadvice(45%versus34%respectively),

andthegaphasnarrowedslightlysince2011(9%differencein2013comparedto13%difference

in2011).

Respondents who have sought financial advice

“Have you ever sought the services of a professional financial adviser on pensions and investments?” (Base: 2,038)

100%–

90%–

80%–

70%–

60%–

50%–

40%–

30%–

20%–

10%–

0%–May 2011 Jan 2013 Dec 2013 Men Aged Aged Aged Aged AB C1 25–34 34–44 55–64 65+

33% 39% 34% 33% 25% 27% 42% 45% 41% 36%

67% 61% 66% 67% 75% 73% 58% 55% 58% 55%

Havenotsoughtadvice(“unadvised”)

Havesoughtadvice(“advised”)

The public’s appetite for investment advice

Analysis of Dec 2013 results by sub-category

the public’s appetite for investment advice



Fromthis,thefollowinganalysiscanbemade:

• Self-advice:menaremoreconfidentinself-advisingthanwomen:30%ofmensaidtheywould

ratherdothis,whereasonly17%ofwomenrespondedthisway.16%aged25–34,comparedto

45%aged65+.

• Never thought about receiving advice:youngeradultsweremorelikelytosaythis:25%compared

toonly9%aged65+.Thisgroupalsolinkscloselywiththegroupthatdoesnotthinktheycan

affordadvice.

Barriers to financial advice: All those sceptics• Thoserespondentswhohavenotsoughtadvicewereaskedwhathadpreventedthem.Thequestion

hasbeenchangedslightlythistimetoallowforamorerobustanalysis.

• 38%donothavethemoneytoinvest,almostthesameasthe35%whosaidthislastyear.16%

thoughttheycouldnotaffordafinancialadviser,thesameaslastyear.

• 4%tookthenewoptionthattheydonottakeinvestmentdecisionsintheirhousehold.

• WecombinedtheJan2013choices“don’tneedhelpinvesting,Idoitmyself”,“nevertrusted

financialadvisers”and“ratheruseothersourcesofadvice/information”intoasingle“self-advise

usingothersourcesofinformation”.First,theyareessentiallythesamechoices.Second,combining

themyieldsalargersamplesizeresultinginmorerobustanalysis.

• 24%saidthey“wouldratherself-adviseusingothersourcesofinformationinsteadofprofessional

financialadvice”.Overallitwas10%lessthanlastyear.

• Wefilteredoutthosewhoansweredthattheydonothavefundsorcouldnotaffordadvice,aswith

the2012survey.Wealsofilteredoutrespondentswhosaytheydonottakeinvestmentdecisionsin

theirhousehold,inanefforttocreateasurveybasedonthosewhodo.

Reasons why consumers do not take financial advice

“What is the main reason why you have never sought professional financial advice?” (Base: 1,352)

100%–

90%–

80%–

70%–

60%–

50%–

40%–

30%–

20%–

10%–

0%– May 2011 Jan 2013 Dec 2013

29% 35% 42%

16%16%

34% 24%

21% 15% 19%

50%

Neverreallythoughtaboutit

Self-advise/ratheruseothersources/nevertrustedadvisers

Don’tthinkIcanaffordaprofessionalfinancialadviser(notaskedin2011)

Don’thavemoneytoinvest(notaskedin2011)/

Don’ttakeinvestmentdecisionsinhousehold(notaskedinJan2013)


Awareness of the RDR changes: More work is needed• Awarenessofadviserprofessionalismrequirementsisvirtuallythesameaslastyearforboth

unadvisedandadvisedrespondents.

• 29%ofunadvisedcustomersareawareoftheprofessionalismchanges,almostthesameasthe

32%lastyear;similarlyknowledgeoftheremunerationrequirementshasalsoremainedsteady

at35%.

• Foradvisedrespondents,knowledgeofremunerationhasfallenfromnearlytwo-thirdsofcustomers

tojustoverhalf.Knowledgeofprofessionalismhasalsodeclined.

• WithoneoftheaimsoftheRDRbeingtoimprovethepublic’sconfidenceinfinancialadvice,this

lackofawarenessoftheRDRamongthosewhodonotreceivefinancialadviceisstillworrying.

Are you aware that, as a result of new regulations, retail investment and pensions financial advisers will have to...

• Hold a more advanced qualification and have to meet enhanced professional standards?

• Establish an upfront agreement about the cost of advice?

Note: 2011 respondents who could not afford advice or do not have money to invest were not filtered out.

Unadvised respondents’ awareness of RDR

Bases: Dec 2013: 571; Jan 2013: 605; 2011: 2,055

Advised respondents’ awareness of RDR

Bases: Dec 2013: 787; Jan 2013: 686

35%

29%

70%–

60%–

50%–

40%–

30%–

20%–

10%–

0%– May 2011 Jan 2013 Dec 2013

20%

19%

35%

32%

Remuneration

Professionalism

70%–

60%–

50%–

40%–

30%–

20%–

10%–

0%– Jan 2013 Dec 2013

50%

64%

52%

42%

Remuneration

Professionalism




Fromthis,thefollowinganalysiscanbemade:

• Unadvised “Self-advised”:36%ofthoseunadvisedrespondentswhoprefertoself-advisesaidthey

wereawareoftheprofessionalismchanges,almostexactlythesameaslastyear(37%).Similarly,

47%ofthisgroupsaidtheyknewaboutadvisercharging,againsimilartothe48%lastyear.These

consistentfindingssuggestthattheirresearchoninvestmentsmayhavealsoinformedthemonRDR

developments.

• Unadvised “Never-thought”:21%oftheunadvisedrespondentswhosaidtheyhadneverthought

aboutadviceknewaboutprofessionalismchanges,and20%hadheardaboutadvisercharging,

downfromthe29%and21%respectivelylastyear.

• More work needed to inform the unadvised:aimedatthosewhohaveneverthoughtaboutadvice

whotendtooptfordo-it-yourselfadvice,andforthosewhoarelookingforhelponwhattodowith

theirinvestments.

• Advised respondents:thedeclineamongthisgroupfromlastyearisalsoimportant.Infact,the16%

reductioninawarenessofprofessionalismchangesismoresignificantthanthe9%reductionfor

unadvisedrespondents.


Perceived advice substitutes: The internet is key• Aswithlastyear,weaskedthe318consumerswhosaidtheyself-advisetorankthesourcesof

informationtheyaremostlikelytouse.Thiswasoneofthereasonswecreatedasingle“self-advice”

choicethisyearbecauseithasgivenusalargerbasefromwhichtowork:318respondentsthisyear

comparedtojust73in2012.

• Financial assistance websites were the top choice:46%overallrankedthisfirstchoice,and27%

secondchoice,anditreceivedtheleadingmeanratingbyaconsiderablemargin.

• Newspapersandmagazinesrankedsecondoverall,followedbyfamilyandfriends.

• The Money Advice Service was the fourth choice: ithadthenextmostfavourablemeanrating.

• Women:thiswastheonlyrespondentsub-groupthatdiffereddiscerniblyfromtheoverallresult.

Ourresultsfoundthatfamilyandfriendswastheirsecondpreferredchoice,andaconsiderable

marginaheadoftheMAS.

Itisnotsurprisingthatsomanyconsumersrelysoheavilyonespeciallytheweekendpersonalfinance

pressfortheiradvice.7Itisfullofcoverageandspeculationofinvestmentopportunities,thoughfew

readersmayfullyappreciatetherisksinvolvedinrelyingsolelyonimpersonalinformationthatcouldbe

takentobeappropriateforeveryindividualsituation.

7 AglanceatthepersonalfinancepagesfollowingNewYear2014givessomeindicationoftherangeofspeculationoninvestmentopportunitiesfortheyear.Seeforexample,Make2014theyeartostartinvesting:weexplainthreedifferentwaystostartinvestinginshares,includingthe‘trulylazy’option,byRichardEvans,TheTelegraph,Saturday4January2014;“Thebestwaystomakeaprofitin2014

Sources of advice/information other than professional advice

“You said you would rather self-advise on investments and pensions using sources of information other than the professional financial advice sector.” Please rank from 1= Most preferred to 7 = Least preferred (Base: 318)

0 1 2 3 4 5 6 7

Financial assistance websites (e.g. Moneysavingexpert)

Newspapers or magazines

Family/friends

The Money Advice Service (MAS)

FCA website

Other professionals (e.g. Solicitor or accountant)

Other

1.93

3.47

3.55

3.72

3.89

4.9

6.03

Mean ranking: 1 = most preferred 7 = least preferred




Nick Hurman’s view:Theclearfindingistheroleoffinancialassistancewebsitesinsupportingself-investors.

Allbuthalf(46%)ofself-advisersrankthissourcefirstandthemeanpreferenceisjust

above2nd(meanscore=1.93).Othersourcesarerankedonaverageequallywithmean

rankingaround31/2–theseincludetheMoneyAdviceService(3.47),Friends/family(3.55),

Newspapers/magazines(3.56)andtheFCAwebsite(3.89).Otherprofessionalsareranked

around5th(4.90)andothersourcesatthebottom(6.03).ComparisonwithWave2suggests

thattheimportanceofwebsitestothisgroupmaybeincreasingandtheyarerelyinglesson

familyandfriendsorotherprofessionals.

Thecombinationofthesignificantgroupofself-advisersandtheirprimaryrelianceon

websitessupportsthereportedgrowthofnon-advisedmodelsinthewakeoftheRDR

changes.Advisersmaywishtoconsiderhowtheirofferingcouldrespondtothis–perhaps

deployinginvestmentplatformsthatallowtheinvestortoresearchandmakeamendmentsto

investmentseitherbythemselveswhentheychoosetoorinco-operation,insomeway,with

theiradviser.

Itwouldbeinterestinginfuturewavestoexploreifthereisasimilargroupamongstthe

adviseruserswhoalsoself-adviseandtherolethattheiradvisersplayintheiroverall

financialplanning.


RDR impact: Trust, confidence and likelihood of taking advice

Overall public trust and confidence: improvement still awaited?• Anewquestionaskedfairlyearlyinthe2013surveyassessingrespondents’overallleveloftrust

andconfidenceintheprofessionaladvicesector.Thequestionwasasimpleyes/no/don’tknow,

andposedfairlyearlyinthesurveybeforethequestionsabouttheRDRchanges.

• AfterthequestionsabouttheRDRchanges,theywerethenaskedwhethertheyhadmoreorless

confidenceinthesectorthanayearago.

Overall:

• Unadvised:nearlyhalfofrespondentssaidtheydonothaveconfidenceinthesector,andathird

saytheydidnotknow.Onlylessthanafifth(18%)saidyes.

• Advised:nearlyhalfofrespondents(43%)saidtheydohaveconfidenceinthesector,

andathirddonot.

• Change since last year: inthefollow-upquestion,most(bothunadvisedandadvisedrespondents)

thoughttheirviews

hadnotchanged,andafifththoughttheirconfidencewasworse.Onlysmallportionsthoughtit

hadimproved.

• Unadvisedrespondentsaremorescepticalofthesectorwhereasadvisedonesarelessso.

Analysisandimplications

Wecandrawthefollowinganalysisfromtheseresults:

• Whenthegroupthatsaidtheydidnothavetrustandconfidencewasaskedwhetherithad

improved,70%saidtherewasnochangeinviews,afifththoughtitwasactuallyworse,andonly1%

thoughtitwasbetter.

• However,thoseunadvisedcustomerswhowereawareoftheRDRchangeswerelesspessimistic

aboutthesector.Theproportionthatthoughtthemarketwasworseactuallyhalved,the“don’t

knows”quartered,butmostoftheseviewchangeshadgoneto“thesame”groupwhichincreased

by20%.Theproportionthatthoughttheirconfidencehadimprovedonlyincreasedslightly.

Overall public trust and confidence in the professional financial advice sector

“Would you say you have trust and confidence in the advice sector?” (Bases: Unadvised: 571; Advised: 686)

Unadvised Advised Don’tknow

No

Yes

100%–

90%–

80%–

70%–

60%–

50%–

40%–

30%–

20%–

10%–

0%–

18%

43%

35%

48%

34%

21%

RDR im

pact: trust, confidence and likelihood of taking advice


RDR im


Nick Hurman’s view:Nearlytwothirdsofrespondentssaytrustandconfidencehasstayedthesamebut3in20

(15%)reportthemgoingdownwithonlyhalfthatnumber(7%)sayingitwentup.Ifwedivide

respondentsbetweenadviceusersandnon-users,thedifferencesareonlyslight–users

beingonlymarginallylessnegative.Thismightsuggestthatoveralltrustisbeingdrivenby

broadertrendsthanpersonalexperienceofpensionsandinvestments.

Don’tknow

Less

Thesame

More

100%–

90%–

80%–

70%–

60%–

50%–

40%–

30%–

20%–

10%–

0%– Unadvised Unadvised: No trust/ Unadvised: Advised Advised: No trust/ Advised: confidence in sector Aware of RDR confidence in sector Aware of RDR professionalism professionalism changes changes

“Would you say you have more or less trust and confidence in the professional advice sector compared to a year ago?” (Base: 1,478)

60% 70% 79% 71% 65% 72%

19%

21%

8% 11%

26%

8% 16% 8% 4% 9% 6% 4%

5% 1% 8% 8% 3%

17%


Likelihood to use advice as a result of the RDRAsinthelasttwosurveys,weaskedunadvisedrespondentswhethertheywouldconsiderprofessional

financialadviceinthelightoftheRDRchanges.

• Theresultswerelargelysimilarto2011and2012withaslightincreaseinthosesayingtheywould

consideradvice.35%saidtheymightorwoulddefinitelyconsiderfinancialadvice,comparedto

33%in2011and36%in2012.

• Thegroupofunadvisedrespondentsmostlikelytoreconsideradvicewerethosewhoneverthought

aboutadvice.Theyareslightlymorelikelytosaydefinitely/mightconsideradvice,andaremuch

lesslikelytonotreconsider.

Iwilldefinitelyconsiderprofessionalfinancialadvice

Imightconsiderprofessionalfinancialadvice

Iwillprobablynotconsiderprofessionalfinancialadvice

Iwilldefinitelyconsiderprofessionalfinancialadvice

Don’tknow

Unadvised respondents: likelihood of using advice

“Given these changes, do you think you are likely to consider financial advice in the future?” (Bases: May 2011: 1,340; Jan 2013: 605; Dec 2013:571)

100%–

90%–

80%–

70%–

60%–

50%–

40%–

30%–

20%–

10%–

0%– May Jan Dec Women Aged Aged Aged Group Group Yes: No: Self- Never 2011 2013 2013 25–34 35–44 55–64 AB C1 confidence confidence Advise thought in advice in advice about it

1% 1% 2% 1%

Positive/ negative results dividing line, Dec 2013 overall: 35%

3% 3% 3% 4% 7% 4% 11%

6%

30% 33% 32% 32%

55%

37%

25%

26%

39%

56%

20%

30%

35%

18% 18% 21% 26% 14% 23% 18% 18% 20% 7%

13% 10% 35%

27% 32%

24% 24%

19%

23%

28%

35%

26%

21%

30%

31% 16%

22% 14%

19% 17%

8%

10% 29% 17% 15%

5%

35%

28%

8%

Analysis of Dec 2013 results by sub-categoryOverall result

RDR im



RD

R impact: trust, confidence and likelihood of

taking adviceFromthis,thefollowinganalysiscanbemade:

• Ofthosewhosaidthattheyneverreallythoughtaboutreceivingadviceareslightlymorelikelyto

reconsiderreceivingitasaresultoftheRDR.Therewasobviouslyamuchgreaterproportionof

“don’tknows”thanoverall:35%ofthisgroupsaidthis,comparedto21%overall.

• Thosewhohavealreadyhigherlevelsoftrustandconfidenceinthesectoraremuchmorelikely

tosayyestothisquestion.However,amongthosewhosaidtheyhavelowtrustandconfidence,

onlyaquarterwouldreconsiderreceivingadvice.

• Theleastlikelytoreconsideradviceweretheself-advisers.Thiscouldeitherbebecausethey

thinktheDIYiseasierand/orcheaper;ortheirlevelsoftrustandconfidencearesolowthat

theRDRchangeswouldnotmakeadifference.

• Ithasalsomaintainedconsistencydespiteoureffortstoensurethatthosewhocannotafford

financialadvicearefullystrippedoutoftherespondentgroup.Thissuggestsaslightlyreduced

interestsince2011.Nevertheless,thisfindingnowcreatesamorerobustcaseforcommunicating

theRDR,aswecannowsaywithstrongerconfidencethattheRDRwillbringnewcustomers

tothemarket.


Difficulty finding an adviserInresponsetothepublicityaboutconsumersreceivingdifficultyaccessingadviceinthepost-RDR

environment,weaskedanewquestioninthesurveytoadvisedrespondentsaboutdifficultyobtaining

theservicesofaprofessionalfinancialadviser.

• Overall:anoverwhelming80%saidtheyhadnotexperiencedanydifficultygettingretailinvestment

advice.Thereweredifferencesbyagegroup.

• Older adults:evenfeweradultsaged55–64haddifficultyinthisarea,likelybecausetheywere

alreadyengagedinpreparingforretirementandthinkingaboutannuitiesadvice.

• Younger adults:forrespondentsaged25–35,thebreakdownwasfarlessoptimistic.Only63%

saidtheyhadnodifficultygettingadvice,whereas19%saidtheydidnotknowwheretolookto

findanadviser.

• AlthoughsomeoftheserespondentsmayhavebeenreferringtoexperiencespriortotheRDR

changes,thiscounterstheclaimthatcustomersarehavingdifficultysearchingforadvice.

Advised respondents: difficulty in finding advice

“Have you ever experienced difficulty obtaining the services of a professional financial adviser for assistance in retail investments or pensions?” (Base: 686 advised respondents)

100%–

90%–

80%–

70%–

60%–

50%–

40%–

30%–

20%–

10%–

0%– Overall Aged 55–64 Aged 25–35

Ihavenotexperienceddifficulty

Confusedornotclearaboutthedifferenttypesofadviser

Notknowingwheretolooktofindanadviser

BeingtoldbyanadviserthatIdonothavesufficientfunds

WasquotedtheAdviserChargeandIrealisedthatIcouldnotaffordit

Other

5% 4%

8% 9%

6%

90% 80%

63%

19%

18%

15%

RDR im



Sources of information• ForthosewhosaidtheywereawareoftheRDR,themediawasbysomemarginthemost

popularsourcewheretheyfirstheardaboutthechanges,andthisistrueforbothunadvised

andadvisedrespondents.

• Boththisquestionandtheearlieroneaboutwhereself-advisedgettheirinformationpointtothe

mediaasthepublic’sprimarysourceofinformationontheirinvestmentissues,alongwithfinancial

assistancewebsitessuchasmoneysavingexpert.com.

• OtherinformationsourcessuchastheMoneyAdviceServiceortheFCAwebsitehaveranked

verylow,suggestingthatactualorpotentialcustomersoffinancialadvicedonotreallyuse

thesesources.

• Theonuswillbeonadvisoryfirmstopromotethevirtuesofprofessionaladvicetoitsprospective

clientsanddevisewaystomarketthechangeswhenprospectingfornewcustomers.

Advised respondents’ reactions• Astheprevioussurveys,advisedrespondentswereaskedoutrightwhethertheythinkthe

regulatorychangesdescribedtotheminthesurveychangeswouldimprovetheirconfidenceofthe

professionaladvicesector.

• 47%oftheadvisedrespondentsthoughtthechangeswouldimprovetheirconfidenceofthe

professionaladvicemarket.

• Althoughthisconstitutesanoveralldropfrom61%lastyear,mostofthischangeofsentiment

wenttothe“Don’tknows”.TheproportionofrespondentswhodonotthinktheRDRwillimprove

confidence(25%)isvirtuallythesameaslastyear.

• Therefore,amongthoserespondentswhohavedecidedonaview(iestrippingoutthe“Don’t

knows”),theproportionisvirtuallyidenticaltolastyear.

• Menandrespondentsaged25–34weremorelikelytoagreethattheRDRhasimprovedtheirconfidence.

RDR im


Advised respondents: trust and confidence as a result of the RDR changes

“Do you think these changes will improve your trust and confidence in the professional financial advice sector?” (Base: 686 advised respondents)

100%–

90%–

80%–

70%–

60%–

50%–

40%–

30%–

20%–

10%–

0%– May 2011 Jan 2013 Dec 2013

Don’tknow

No

Yes

51%

61%

47%

20%

23%

25%

29% 17%

28%


Thefollowingimplicationscanbedrawnfromthesevarioussetsoffindings:

• ThefavouredchoiceforadvisedconsumersisthattheRDRwillhaveanoverallpositiveimpact

ontheirtrustandconfidenceintheadvicesector.Althoughtheproportionthinkingthiswayhas

declinedsincelastyear,saying“yes”isstillthemostpopularchoice.

• Thatsaid,thereisquiteahighproportionof“Don’tknows”,28%constitutinga65%increasefrom

lastyear.Giventhefactthattheserespondentshavereceivedadvicebefore,andareawareofthe

RDRchangesatleastsuperficially(ifnothingelsebutfromthesurveyquestionnaireitself),we

suspectthatthesepeoplearemore undecidedthanoutrightunaware.

• Thishighproportionofundecidedcustomersmightbeatleastpartiallyexplainedbythefactthat

mostpeoplegottheirinformationabouttheRDRfromnewspapersandmagazines.Whatlittle

mediacoverageontheRDRthathasappearedthisyearhasbeendominatedeitherbytheadvice

gapissueortheconcernaboutvalueofadvice,bothofwhichcanbeconstruedasnegative

outcomesforconsumers.

• ThefactthatthenegativecoveragehasnottippedthebalanceofpublicopinionagainsttheRDRis

tellingenoughinandofitself.Themostpopularchoiceisstillpositive;andmostofthosewhoare

notareundecidedbecausewhiletheyarebeingremindedofthecostsofthechanges,theycanstill

understandthebenefits.

Nick Hurman’s view:ThesurveythenexploreswhetherspecificRDRchangesarehavinganydirecteffectonthe

viewsof‘self-advisers’andthe‘neverthought’groupsofpotentialusers.Theresponse

suggeststhatmeasureswithintheRDRtoimprovetrustarehavingdifferentimpactson

thesegroups.Athird(35%)ofself-adviserssaytheyareawareoftheincreasedlevelsof

qualificationandprofessionalismintroducedfollowingtheRDRandnearlyhalf(47%)ofthe

introductionofadvisercharging.ThissuggeststhatawarenessofRDRchangesisfindingits

waythroughtoself-investorsbutmaynotbehavingasignificanteffectonadvisertrust–or

incounteractingpreviousorcontraryopinions.

Lookingatwherethesegroupsheardaboutthechanges,overathird(37%)saynewspapers/

magazines–suggestingthetraditionalpressisstillimportantasasourceofmoregeneral

financialnews.Apossibleinferenceisthataseditorialisedsources,theymayalsohave

influencedhowthesegroupsinterpretedthechanges.Otherpotentialsourcesarefarless

impactfulwithonly1in8(12%)citingfriendsandfamily,1in10(10%)financialassistance

websitesandasfewas1in20theFCAwebsite(5%)andtheMoneyAdviceService(4%).

However,giventhesechanges,ofthosethatwereaware,whilstathirdsaythattheymight

(32%)ordefinitelywould(3%)considerfinancialadviceinthefuture,nearlyahalfsaythey

probably(24%)ordefinitely(19%)wouldn’t.Around1in5(19%)don’tknow.Sowemight

inferthatthesechangesarehavingsome,thoughbynomeansadecisive,impacton

thisgroup.

RDR im



overall findings and im

plicationsIstheRDRonatrajectorytoimprovingpublictrustandconfidenceintheadvicesector?

Onceagain,theresultsofoursurveysuggestthattheansweris“yes”.

Beforegoingfurther,wemuststartwiththefaircaveatthatthisistheresultofanon-lineratherthan

telephonesurvey,sowearenotpretendingtohavecompletelyrobustfindings,butrathertoprovidea

basicpictureofthepublic’ssentiments.Thatsaid,asizeableenoughproportionofconsumersevenin

olderagegroupsdonowusetheinternetforarangeofpurposes,besideswhichmanyofthesefindings

aretrackingandconsistentfromourpreviouson-linesurveys,sowehavereasonenoughtobeconfident

thattheseresultsgiveusanoverallpictureofsentimentinthisarea.

Whiletheseresultsthemselvesarebynomeansdecisiveinthatthereisstillagreatdealofuncertainty

amongconsumersaboutwhetherthesechangeswillmakeadifference,whocanblamethem

consideringthatthelimitedcoveragetheRDRhasreceivedhasinfactbeenquitepessimistic?Italso

maybeagoodsignthatthosewhoarenotpositiveareundecidedratherthandecisivelynegative.

A step in the right directionTrust and confidence in the sector

Thereisclearlyroomforimprovementinoverallpublictrustandconfidenceinthesector.Thisyear,

publictrustinthesectorisquitelow,especiallyamongconsumerswhohaveneversoughtadvice.Ona

morepositivenote,overathirdarestillundecided.Morepositivestill,whenaskedaboutwhethertheir

trusthasimproved,thosewhowereawareoftheRDRprofessionalismchangesweremorelikelytosay

theirtrustwasthesameaslastyear,morelikelytothinktheirtrusthadimproved,andlesslikelytosay

thatithaddecreased.Sowhilethereisclearlymuchworktobedone,theRDRchangesarebeginningto

haveapositiveeffectonpeople’sviewstowardsthesector.

Thereisanevenstrongerindicationthatrespondentswhohavesoughtadvicearemorepositiveabout

theRDRchangeswhenaskedabouttheirviewsinthelightofthem.Nearlyhalfofadvisedrespondents

thoughttheirtrustandconfidenceinthesectorhadimprovedasaresultoftheRDRchanges.Asinthe

lasttwosurveys,thiswasthefavouredoption.Alargeproportionarestillundecided,probablymindful

ofthenegativepressaboutdwindlingadvisernumbersandnewlytransparentcharges,yettheyhavenot

comedownagainst.

Likelihood of using advice as a result of the RDR: nearly 5 million potential customers

Perhapsthestrongestindicatoristhelikelihoodamongunadvisedconsumerstoconsideradviceas

aresultofthechanges.Overathird(35%)eithermightorwoulddefinitelydothis.Thisisexactly

consistentwiththeprevioustwosurveys,whichcertainlystrengthensthecredibilityofthisfindingaside

fromtheobviouslimitationsstemmingfromthefactthatthisisanon-linenottelephonesurvey.Italso

helddespiteoureffortstoimprovethemethodologybyfilteringoutcustomerswhomightbedeterredby

issuessuchasaffordability.Amongthetwomainsubgroupsofunadvisedcustomers,itwasthe“never

thoughtaboutit”groupthatweremorelikelytoreconsideradvicethantherespondentswhowould

preferto“self-advise”.Youngerrespondents(especiallythoseaged25–34)wereevenmorelikelyto

considerthis.

Asintheprevioussurveys,weequatedthis35%totheactualUKadultpopulation,andcannow

confidentlyestimatethatatleast4.8millionnewcustomerscouldbeintroducedtotheadvicemarketas

aresultoftheRDRchanges.Ifeachofthesecustomersspentanaverageof£800inadvisercharges,it

wouldbeapotentialnewmarketworthover£3.8bn.

Overall findings and implications


Thiscompareswith5.3millionrespondentsinthe2012survey.Itisfairlyconsistentwithlastyear’s

results,theonlydifferencebeingthatitdidnotstripoutthosewhodonottakeinvestmentdecisionsin

theirhousehold.Hadthisquestionbeenaskedin2012,andthesameproportion(1.3million)tookthat

option,theresultwouldbemorecomparabletothisyear.

The potential untapped market: more like 14 million?

Wethinkthisnewmarketcouldbeworthfarmorethanjust£3.8bn,inactualfactwellover£10bn.

Weareevenmoreconfidentthanlastyearwhatthisnumbercouldbestartingfrom32.5millionadults

whohaveneverreceivedfinancialadvice:

• 17.5millioncitedaffordabilityornothavingfundstoinvestasthereasonforneverreceivingadvice;

• another1.3millionsaidtheydonottakeinvestmentdecisionsintheirhousehold;

• thisleaves13.7millionunadvisedhouseholdswhohavethefundstoinvest,canaffordanadviser,

andthereforeareinapositiontoreceivefinancialadvice.Again,ifeachspentanaverageof£800in

advisercharges,thatequatesto£10.9bn.

Challenges in improving the marketThesefiguresofnearly14millioncustomersspendingnearly£11bnwouldbefeasibleifthesectorand

itsregulatorweretoputitscollectiveeffortstoconfronttheseveralchallengeshighlightedinthisreport.

Improving awareness of the RDR changes: an important role for advisers

EssentialtoallofthisisimprovedawarenessoftheRDRchanges.Nowthatthechangeshavebeen

implemented,avitalnextsteptowardsimprovingpublictrustandconfidenceisawarenessofthe

reformsinthefirstplace.InJune2011andDecember2012,wepublishedtheresultsofconsumer

surveystoassessthepublic’sknowledgeoftheseRDRchanges.

Inthe2011and2012surveys,wetooktheviewthattheMoneyAdviceServicehasanimportantroleto

playinthisprocessofeducatingtheunadvisedconsumers.Thisyearwehaveslightlyalteredourview,

andnowbelievethatadvisersthemselveshaveakeyroleinreachingouttothismarket.Thereasonfor

thisamendmentisthehighproportionofself-adviserswhorelyoninternet-basedresourcesfortheir

research.Itsuggeststhatifadvisersweretoincreasetheiron-linepresence,andperhapsinvestin

creatingresourcesonlinethatcanprovideprospectiveconsumerswithsomeinformationtohelpthem

withtheirresearch,withthepromiseofmoreiftheybookedaface-to-facesession,thismighthelp.

Moreover,iftheprofessionalbodiessuchourselvesasthePersonalFinanceSocietyrevitaliseditson-

lineemphasisinitsFind-an-Adviserresources,thismighthelp.

Educating the public on the value of advice: more than just a few Google searches

Asignificantpartofthatawarenessmustbearoundthevalueofadvice.Whileprofessionaladvicehas

alwayshadacost,itisnowmorevisibleintheformoftheadvisercharge.Increasingtransparencyand

eliminatingcommissionbiashasbeentherightthingtodo.Andthisremainsthecasedespitethereality

thatconsumersmightseethisasanewcosttoavoid.

Thefindingsfromthissurveysuggestthatmostpeopleseefinancialadviceassomesortofprocess

thatcouldbecircumventedwiththehelpoftheinternetandnewsmedia.Inatimewhenadviserssold

onthebasisofcommissionandincentives,theymayhavebeenright.Themorecynicalobserversmay

havebeenforgivenforseeingitmerelyasakindofhighlypersonalsalesandmarketingprocess.Soa

strategytoavoiditsomehowcouldhardlybeillogical.


plications


Howevernow,withmoreinherentcomplexityintheinvestments,personalpensionsandprotection

marketsandasaresultmorestringentregulatoryandprofessionalismrequirementsfordistributors,

financialadvicehaschanged.Somustconsumers’perceptionsofit.Thepublicmustbegintosee

professionalfinancialadviceasanessentialservicethathascostandvalue,andsomethingthatcannot

beusurpedbyafewGooglesearchesoraskimthroughtheweekendpersonalfinancepages.Itmustget

togripswiththevalueoffinancialadviceinthewayitdidforotherservicessuchaslegaladviceorany

otherprofessionalservice.

WebelievethetruebenefitoftheRDRisyettocome,buttheendresultshouldbeafinancialadvice

marketthatismoreprofessionalandtrustworthy.Thiswilltaketime.Higherqualifiedadvisers,

providingmoretransparentservicesandremunerationpractices,willbringaboutmuchneeded

improvementstopublicconfidence.

Nick Hurman’s conclusions:There is still a significant part of the market that uses advice or might do so:

• athirdofthemarketsaytheyhavesoughtoutaprofessionaladviseronpensionsand

investments;and

• afurtherquartercoulduseanadviserbuthaven’t;

• togetherthisrepresentsjustunder6in10(58%)ofrespondents.

Thiscontinuestosupporttheviewthatthereisalargelatentdemandforadvice–the

challengeis,asever,engagingwiththispotentialdemandandcreatingawarenessofthe

benefitsofadviceinthepost-RDRenvironment.

Advisers are increasingly having to compete against or integrate with self-directed

investments and non-advised models:

• aquarterofadvicenon-usersidentifiedthemselvesas‘self-advisers’inthesurvey;and

• otherresearchsuggestsoverahalfofadviserusersarealso‘self-advisers’;

• togetherthissuggestsaroundathirdofthemarketmaybeself-advisers.

Perhapsadvisersneedtobemoreflexibleandlookproactivelytofitaroundtheirclients’

needsandexperience:leadingonthebigand/ordifficultdecisions,reviewingclients’own

actionsandsuggestingoptionsformorestraightforwardissuesandprovidingplatformsand

analysisforclientstoreviewandevenactonintheirowntime.Thistypeofmodelseemsto

beincreasingthenormforthesuccessfulweb-basedintermediaries.

Financial assistance websites are commanding an increasing share of voice in

addressing consumers:

• oneofthemoststrikingfeaturesintheresearchisprimacyoffinancialwebsitesas

sourcesofinformationfortheself-advisergroupandtherecedingimportanceofother

sources,suchasfamilyandfriends

• Thisreflectswidersocialtrendsintheusageof,andconfidencein,thewebbothto

research,learnaboutandpurchasehighvalueitems,andsocontributingto

• thegrowingshareofweb-basedpurchasesofpackagedinvestmentproducts.


plications



plicationsAdviserswhohavelittleornoweb‘footprint’mayfinditincreasinglydifficulttogainand

retaintheattentionofconsumerswhohaveaninterestinresearchingandmonitoringtheir

investments.Theymayalsofindotherbusinessesattractingtheattentionofexistingclients

andthenofferingthemtheirownservices.

The changes resulting from RDR are welcomed by many advice users but are having a limited

impact on self-advisers’ interest or trust in professional advice:

• thechangesseemtohaveplayedwellwiththeadvisedmarketandinthissegment

resultingingoodoutcomesforadvisers

• buttheyarenotaddressingtheobjectionsofthosewhohavechosentoinvestwithout

advice;eitherbecausetheyprefertheeaseand/orlowercostofinvestingthemselvesor

theydon’ttrustadviserstoinvestwiselyorintheirbestinterests

Theopenquestionis“whatelsemightpersuadetheself-adviserstotryadvice?”Whilst

advisershavepreviouslybeengreatlyaidedbypersonalreferrals(theinfluenceoffamilyand

friends,forexample),thegrowingimportanceoffinancialwebsitesandthewiderfinancial

mediasuggeststhatthiscouldbethedecisivearenaofconsumerinfluence.Advisersneedto

looktoandsupporttheirprofessionalandtradebodiestoinfluencethedebate.

The potential for further positive movements in trust resulting from RDR is now probably

receding and the burden of communicating these will rest increasingly on advisers:

• therearehintsintheresearchthatRDRismovingfrom‘change’to‘businessasusual’for

consumers(andthemedia)aswellasfortheindustry.

So,advisersmayneedtodevotemoreeffortinsettingoutthebenefitsofthepost-RDR

regimeforbothnewandexistingclientsalongsidethebenefitsoffinancialadviceinitself

tobuildclients’trustnotjustintheirownadvicebutthestrengthofthenewregimearound

increasedethics,professionalismandtransparencyincharging.

Adviserscanbegratefultotheirprofessionalinstituteforcontinuingtotrackconsumers’view

ontheseissues.Welookforwardwithinteresttocontinuingresearchinthisarea.


Appendix: Survey questionnaire and filtering

Haveyoueversoughttheservicesofaprofessionalfinancialadviseronpensionsorinvestments?

1

Giventhesechanges,doyouthinkyouarelikelytoconsiderfinancialadviceinthefuture?

7

•Iwilldefinitelyuseprofessionalfinancialadvice

•Imightconsiderprofessionalfinancialadvice

•Iwillprobablynotconsiderprofessionalfinancialadvice

•Iwilldefinitelynotconsiderprofessionalfinancialadvice

•Don’tknow

Wheredidyouhearaboutthesechanges?6

•MoneyAdviceService

•FSAwebsite

•Financialassistancewebsites(Moneysupermarket.comorsimilar)

•Newspapers/magazines

•Friendsorfamily

•Other

•Can’tremember

Areyouawarethat,asaresultofnewregulations,retailinvestmentandpensionsfinancialadvisersnowhaveto:

5

•Holdamoreadvancedqualificationandhavetomeetenhancedprofessionalstandards?

•Establishanupfrontagreementwiththecustomeraboutthecostofinvestmentadvice(ie.commissiononinvestmentadvicehasbeenbanned)?

Wouldyousayyouhavetrustandconfidenceintheprofessionalfinancialadvicesector?

Yes / No / Don’tknow

4

Yousaidyouuseothersourcesofinfo/adviceratherthanprofessionalfinancialadvice.Whatsourcesdoyouuseforhelponmakinginvestment/pensionsdecisions?

3

•Don’tthinkIneedhelpinvesting:doitmyself

•Family/friends


•FSAwebsite

•Financialassistancewebsitesonly(egMoneysavingexpert)

•Newspapersormagazinesonly

•Otherprofessionalsegsolicitororaccountant

•Other__________

Whatisthemainreasonwhyyouhaveneversoughtprofessionalfinancialadviceonpensionsorinvestments?

2

•Neverwantedtoinvestmymoney,ordon’thavethemoneytoinvest

•I don’t take investment decisions in my household, so I don’t really know

•DefinitelyknowIcan’taffordaprofessionalfinancialadviser

•Neverreallythoughtaboutit

•I’dratheruseothersourcesofadvice/informationinsteadofprofessionalfinancialadvice

Yes

No

2,038

1,352

560220

253

318

318

571

231Yes to either/both No to both

340

231

571

27The RDR and Consumers: Thepublic’sviewstowardstheadvicemarket

Appendix: Survey questionnaire and filteringFinalquestionnairewasundertaken4–5December2013

Key: softboxoutline=re-runofJan2013question;

Boldboxoutline,oroption=newquestion/option;numberinbox=weightednumberofrespondentsansweringthatquestion

Wouldyousayyouhavetrustandconfidenceintheprofessionalfinancialadvicesector?


8

DoyouthinkthesechangeswillimproveYOURconfidenceyouhaveinprofessionalfinancialadvice?


12

ThinkingaboutmeasurestoimproveYOURtrustandconfidenceintheprofessionaladvicesector,whatotherthingsdoyouthinkwouldworkforyou?:

814

•EnhancedregulationofadvisersbytheFinancialConductAuthority

•Alargerselectionofqualifiedadvisers

•AdviserswiththeCharteredFinancialPlannertitle

•Betterclarityoftherisksinvolvedwithinvestmentproducts

•Bettereducation/informationonhowtousefinancialadvisers

•Betterinformationonhowtofindqualifiedfinancialadvisers

•Moretransparentpricingforadvice

Wheredidyouhearaboutthesechanges?11

•Myexistingfinancialadviser

•FSAwebsite


•Otherfinancialassistancewebsites(Unbiased,Find-an-Adviserorsimilar)

•Newspapers/media

•Friendsorfamily

•Other

Haveyoueverexperiencedanydifficultyobtainingtheservicesofaprofessionalfinancialadviser?Soso,whatsortofdifficulty?

89

•Nodifficulty

•Beingtoldbyfinancialadviser(s)thatIdon’thavesufficientfundstowarrantfinancialadvice

•Notknowingwheretolooktofindasuitablyqualifiedfinancialadviser

•Confusedornotclearaboutthedifferenttypesofadvisers

•WasquotedtheAdviserChargeandIrealisedthatIcouldnotaffordit

•Other:_______

Areyouawarethat,asaresultofnewregulations,retailinvestmentfinancialadvisersnowhaveto:

810

•Holdamoreadvancedqualificationandhavetomeetenhancedprofessionalstandards?

•Establishanupfrontagreementwiththecustomeraboutthecostofadvice(ie.commissionhasbeenbanned)?

•Other:_______

[Twoquestionsaboutlabellingofadvisers]15/16

Demographicquestions&end17

Wouldyousayyouhavemoreorlessconfidenceintheprofessionalfinancialadvicesectorthanayearago?

More /Thesame /Less/Don’tknow

13

686

686

686

387Yes to either/both No to both

387

686

1,477

560

220

571

1,477

1,477

appendix: survey questionnaire and filtering

299


CIILaurence Baxter

HeadofPolicy&Research

20Aldermanbury

LondonEC2V7HY

Email:[email protected]

Who to contact

About the Personal Finance Society (PFS)

Professionalism in practice

ThePersonalFinanceSocietyistheUK’sleadingprofessionalbodyforthefinancialadvisoryindustry,

with34,000members.Itsmissionistoleadthefinancialadvicecommunitytowardshigherlevelsof

professionalism,exhibitedthroughethicalandbehaviouralstandards,interpersonalandbusinessskills

andtechnicalknowledge,totheultimatebenefitoftheprofessionandtheconsumeralike.

ByworkingcloselywithitsmembersthePersonalFinanceSocietyrepresentstheirinterestsbyshaping

thefutureenvironmentinwhichadviceisprovided,helpingtoengendertheconfidenceofthepublic

inthefinancialadvisoryindustryandachievethetrustandrespectaffordedtosimilarestablished

professions.

MembersofthePersonalFinanceSocietyalsobenefitfrommembershipofthewiderChartered

InsuranceInstitutegroup(CII),aworldrenownedproviderofprofessionaltraining,qualificationsand

thoughtleadershiptothefinancialservicesindustry.

www.thepfs.org

CI3J_8626

©TheCharteredInsuranceInstitute2013

The Personal Finance Society 42–48HighRoad,SouthWoodford,LondonE182JPtel:+44 (0)20 8989 8464email:[email protected]:www.cii.co.uk

@pfsconf Personal Finance Society

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