Why people don't seek financial advice and how you can change their mind

By Helen Fisher on September 20, 2018

Help future clients understand the value of financial advice.

One of the biggest challenges facing your company will be potential clients who ask themselves: “Is it worth getting a financial adviser?”

According to a survey carried about by Aegon in May this year, only 10 per cent of people seek out financial advice. The study also revealed that 47 per cent make financial decisions independently and 40 per cent include their spouse or partner. When it came to pension drawdowns, nearly a third didn’t bother consulting a financial adviser.

Real value

Data from the International Longevity Centre (ILC) reveals that personal financial consultant advice has added £2.5bn to the savings and investments of clients and a further £112bn in extra income from pensions.

If you are a professional looking to change the minds of potential (though reluctant) leads, then perhaps you simply need to know how to make them aware of the real value of the services that you can offer them.

Cost

The “Value of Financial Advice Report July 2017” from the ILC also found that almost a third of those surveyed decided against taking professional financial advice due to concerns about the cost.

Although a simple answer to the question “what do financial advisers charge?” is all but impossible without knowing the individual circumstances of the potential client, it is a common misconception that these valuable services are too expensive to be worthwhile.

Knowledgebase

A report by Mintel found that a sizeable group of consumers lack an understanding of what professional financial advice actually involves, have poor knowledge of how to go about finding sources for advice, and may be embarrassed about taking part in the process.

Of the consumers who took part in the survey:

  • 44 per cent thought it too complicated to know how financial firms can help them
  • 34 per cent didn’t believe that professional advice is geared towards them
  • 14 per cent said that they would not know where to begin looking for a financial adviser

Other obstacles

The Retirement Advantage “Retirement Sentiment Index Report – Expanding Horizons” revealed that most over-50s found trust a big issue (42 per cent).

This led to a further 31 per cent not feeling that it was a necessity to consult a financial adviser and 18 per cent thinking that they would see no benefit from doing so anyway.

Turn the tables?

As an adviser who wants to do your job well, you will be looking to add more value to a client’s portfolio than you take from them in fees and charges. It’s a simple rule of business – why else would anyone want to use your talents?

This is why many advisers opt to use a percentage-based fee system, as it sets out a clear relationship between the work they do and the reward they get.

However, letting your clients, both existing and potential, know that the ILC survey found that 90 per cent of people who use financial advice are satisfied might help make those who are wavering take the plunge. The ILC study also found that 63.2 per cent of those people who were happy with the support they received had taken their advice from an independent finance professional.

Think again

With some clear issues being found by numerous studies and surveys, the problem facing you and your firm seem to boil down to how to persuade leads who need help with finances to think again about seeking professional advice.

Many people are concerned about their financial wellbeing in retirement, especially with the rising state pension age threshold, historically low-interest rates on simple savings, and the complex issues surrounding pension investments.

Accessing those who may be putting off decisions is one way to generate leads, and marketing towards targeted demographics can allow you to put persuasive arguments to the test.

Trust

In any business relationship based on dealing with other people’s money, trust is a major factor. When it comes to converting leads into clients, the problem is that trust needs to be earned and built, leaving you in a tricky situation.

Feelings of suspicion on behalf of customers can be even more of a problem when dealing with large sums, and even more so when these are financial long-term plans such as pension pots.

Encouragement

Retirement Advantage’s Pensions Technical Director Andrew Tully believes that the situation is complex. “The increase in trust in professional advisers over the last year is positive. However, the increase in those citing cost as a reason for not consulting an adviser is disappointing, particularly in light of the one in six that say they would trust their pension provider to give them the information they need,” he explained.

“Previous analysis has shown that people who don’t shop around for the best deal on products like annuities and drawdown could lose out on thousands of pounds of income over the course of retirement. So, it is vital that more is done to encourage people to get professional advice and consider all the options available to them to make the most of their hard-earned savings,” he added.

Face-to-face

In an age where robo-advice and internet-based interactions are the norm rather than the exception, the value of offering face-to-face can be an important asset for financial investment advice professionals.

The Financial Conduct Authority (FCA) has named this as one of its eight main reasons why people are not seeking financial advice in large enough numbers.

However, you can use web-based tools to make the most of geo-location search engine capabilities and micro-target leads. This means that consumers can have easy personal access to your services, that you can build a personal trust-based relationship, answer questions more easily, and really get to know what your leads are looking for in a financial adviser.

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