There are vast sums of wealth in the UK still untapped by the financial advice industry.
Traditionally, IFAs use referrals as a source of attracting new clients. But in the new age world of social media and technology – advisers can reach out to many people and families they never stood a chance of reaching.
However, according to a recent survey by Charles Stanley – there are some Brits who could be too unattainable for IFAs to get as clients.
Just over half (52%) of UK adults said they’ve spoken to a financial adviser before, while 48% have not. Some 16% have spoken to one in the last six months.
Of those who had never spoken to a financial adviser, more than half (53%) don’t think anything would ever prompt them to do so. This is truer for men (62%) than women (45%).
When asked to think about financial advice more broadly, most UK adults (24%) said that they only want advice when they feel they need it, and 12% would like specific advice, but only on certain topics – this is higher for those with experience of advice (17%) than those without (5%).
Understanding
Sarah Lord, chief client officer of Cooper Parry Wealth, said to International Adviser: “I don’t believe advice stubborn clients are too unattainable for IFA’s – as the results of the survey show, many individuals do not understand what to seek advice on, this is in my opinion because individuals are not clear as to how advice will benefit them.
“Therefore, for advisers to reach these individuals the key is being able to demonstrate the benefits that seeking financial advice can have on their overall financial position whether that is by having a more tax efficient approach, being clear on their financial goals and objectives or having a plan in place that gives them financial confidence.
“It is interesting that the survey results indicate that a good proportion of individuals would seek advice as a one-off event, this demonstrates that there is still some way to go to raise awareness to potential clients that for the majority, financial advice and financial planning should be an ongoing journey and dialogue with their adviser so that they continue to manage their finances in the most effective way as their life evolves, rather than a one off event.”
James Pearcy-Caldwell, chief executive of Aisa International, added: “Whilst financial advisers and planners recognise the value of financial advice to most people, we also recognise as businesses that not everyone can afford what we offer. The problem is more exacerbated due to the ban on commissions meaning people have to pay for advice, whereas 20 years ago they could be given a simple product and that is probably true of many people nowadays.”
Trigger events and trust
The survey also found that the top reasons unadvised people would take advice on.
Winning the lottery (27%), receiving an inheritance (15%), being offered low-cost advice (10%) and being able to meet them once or twice with no commitment (9%) were the top answers.
Setul Mehta, head of business development and adviser services at The Openwork Partnership, said: “It’s positive to see that clients do understand the need to seek financial advice when coming into an inheritance or a lottery win. Essentially, how they should deal with an influx of money. This means individuals aren’t just keeping their money in the bank and losing out against inflation, or potentially allocating to unsuitable non-regulated financial assets.
“The research demonstrates that it is often a ‘trigger’ event that will lead a client to act. In this sense, it demonstrates that clients are certainly attainable, and the advice gap can be tackled.”
Martin Cotter, managing director of Lumin Wealth, added: “For the unadvised consumer – and by this we typically mean those who have never sought financial advice – the hardest barrier to overcome is trust in the industry. Trust is intrinsically linked to ethical behaviour. When delivering a transparent, cost-effective and personalised service for clients, trust inevitably flourishes.
“Complimentary initial meetings are an excellent way of breaking down the trust barrier for advice-shy clients and gaining a quick overview of client needs and potential solutions. As a sector we can do more to promote the fact that consumers have nothing to lose by getting in touch and meeting with a financial adviser. A no-obligation meeting is a chance to showcase how a clear financial plan can provide significant and long-term value.
“Once a prospective client understands that this is an easy step to make, and that having a clear financial plan is beneficial in numerous ways, then this goes a long way towards building both trust and confidence.”
Financial education
The 2,000 person Charles Stanley survey also found that of those who have spoken to a financial adviser before, 67% had a good experience. Just 6% had an actively negative one, while 27% were neutral.
This statistic highlights that once people get advice there understand the benefits and are mostly happy with their adviser. But how does the UK and the financial advice industry get more to know about the value of advice?
Steve Thompson, partner at GSB Capital, said: “I believe that our main focus should be on the younger generation and education. As advisers we often call for better financial education at school level, where equipping children with financial literacy skills could make such a significant long-term difference to their lives. What’s more, aiming for a basic level of financial education from childhood would also surely bring benefits at a society level.
“Until financial education finds its way onto the curriculum, I think those of us within the financial advice industry have an obligation to think about how we can contribute to increasing the level of financial education in children and young people.
Matt Hammond, chief executive at Navigation Wealth Management, said: “The advice gap is a real challenge. With the majority of high street banks removing financial advice from their proposition following the retail distribution review (RDR) in 2012, many clients don’t know where to turn.
“Financial advice can still be deemed to be for the wealthy, and this causes serious issues and leaves so many areas of a clients’ finances at risk. Most people need advice, they just don’t know it. We must work on educating people on the importance of financial planning – and it needs to start in schools. I believe passionately that financial education should be part of the education curriculum. Financial wellbeing coaching in the workplace is the next step on the journey to help educate the working age on money matters.”
Aisa’s Pearcy-Caldwell added: “The advice gap could be tackled through a mixture of re-introducing commission products for lower requirement clients, and the regulator moving away from the principle that every client should be treated the same irrespective of requirements. The regulator has bought into the idea of full planning when people starting out simply need to start saving usually or providing protection for themselves or their loved ones.”
