ILC-UK has published new analysis to feed into FCA and HM Treasury Financial Advice Market Review.
Ensuring policy and practice raises confidence in the provision of advice is key to increasing uptake, argues the International Longevity Centre – UK (ILC-UK) in their submission to the Financial Advice Market Review (FAMR).
The ILC-UK has undertaken new analysis of the Wealth and Assets Survey (WAS) (1) to feed into their submission. The analysis finds that:
Approximately 18.2 million people took out a financial product in the last two years, with nearly 3.1 million investing in risky assets.
Among the 43.5% who have taken out a financial product in the last two years, approximately 1 in 10 (11.2%) had been influenced by an Independent Financial Adviser. In terms of overall population, this is equivalent to approximately 2 million people.
Worryingly, 2.7 million people took out a financial product in the last two years without collecting any information at all.
The ILC-UK reveal that best buy comparison websites most influenced decisions about which product to take out, followed by information from providers. In making product decisions:
6.1 million people were influenced by “Best buy information, comparison website or shopped around a lot of different sources”;
Approximately 2 million were influenced by an “Independent Financial Adviser”;
Roughly 3.9 million were influenced by “Information collected from providers or providers websites”;
About 1.7 million were influenced by friends or family;
The ILC-UK analysis reveals that older (age 55+) consumers are significantly more likely to influenced by IFAs or providers, than by best buy information on websites.
Consumers who indicated IFAs as the most trustworthy source for retirement income advice, were significantly more likely to have been influenced by an IFA when choosing to take out a financial product.
Homeowners are also significantly more likely to be influenced by an IFA when choosing to take out a financial product. While only 1 in 16 renters (who have taken out a financial product) are likely to be influenced by an IFA, the proportion rises to 1 in 8 for homeowners.
There is greater awareness of the value of IFAs amongst those purchasing potentially risky investments. (2) ILC-UK find that the proportion of people influenced by IFAs doubles for people buying these products.
Consumers who are most financially able, i.e. those who report that they know exactly how much they have in their bank account, are also more likely to choose DIY financial solutions, by surfing best buy websites or shopping around.
The number of people not collecting any information or just relying on friends and family before taking out a financial product is large – about 4.4 million. Among them, older consumers (aged 75 plus) tend to be over-represented.
ILC-UK point out that those who are burdened by debt do not reach out. Among consumers who felt burdened by debt (approximately 17% of the sample), only about 1 in 8 (or 12.7%) received any advice at all to help them deal with their debts, and among them, 3 in 5 received advice from a free agency.