The results of a new poll provide financial advisers with a lot of food for thought.
A recent poll, conducted by Tilney, shows that many investors don’t just want low-cost financial advice, they’d prefer not to pay for it at all.
The poll goes on to state that a significant share of them have never given any thought to the idea of getting professional help with money advice and planning.
Of the 2,000 British adults questioned in the survey, 16% shied away from financial advice because of the assumption that intermediaries’ objectivity might be clouded by commissions.
The prevalence of this misconception remains despite commission-based retail investment advice being banned six years ago as part of the RDR (Retail Distribution Review).
People in the pre-retirement group (aged 55-64) were most likely to have this perception. About 26% of the members of this group who did not seek financial advice held this view.
Among the 2,000 adults who participated in the poll, 81% had not made use of the services of a professional financial adviser – and among those 26% cited fees as one of the factors.
One of the most popular reasons respondents quoted for not seeking financial advice, was that they preferred to manage their own financial affairs (33%). Another third admitted that the thought had simply never occurred to them.
About one in five respondents preferred to seek advice from friends or family, while 25% got their financial advice from internet searches.
A meagre 11% of participants thought that the trustworthiness of the financial services industry had increased since the financial crisis. A disturbing 30%, on the other hand, believed the industry had become less worthy of their trust, while nearly two-fifths (38%) perceived no change.
Jason Hollands, the managing director at Tilney, said: “The research shows that despite major regulatory reforms to improve transparency and bring an end to commission-based financial advice, it takes many years to shift deeply entrenched opinions.”
He added that there were always going to be individuals who have enough confidence to personally make investment decisions, or who were just not willing to pay for advice.
He believes there are nevertheless a large number of individuals who could benefit from financial advice, but who have simply never considered the idea.
Tilney went on to say that bad financial advice from friends or family members, however well intended, or misleading information gained from an internet search, did not offer much in the way of protection should things not go as planned.
He concluded: “Much work needs to be done to highlight the value of sound financial advice in helping people get better outcomes on their savings and investments and in so doing achieving peace of mind.”
Legacy of trail commissions
Earlier in April, the Financial Conduct Authority (FCA) stated that it did not have any immediate plans to do away with the trail commission on share classes that were sold before the introduction of RDR.
Patrick Conolly, a certified financial planner, said advisers of today should no longer be reliant on trail commissions, and that those who were should change their business model.
Another financial specialist, Tim Sargisson, said that with providers moving to terminate trail commissions, financial advisers had to stay in control of their income streams.