Consumers not ready to pay RDR fees for financial advice
Consumers are generally unwilling to pay a fee for financial advice, according to a survey of 2,000 people in the UK conducted on behalf of the business advisory firm Deloitte. Publication of the survey comes as the UK’s Retail Distribution Review (RDR), which will require financial advisers to charge fees rather than take commission, comes into force in 2013.
However, the survey says IFA clients are much more likely to be willing to pay fees. According to the survey, only 12% of IFA clients would reject paying fees for advice. By contrast, bank customers are five times as likely (60%) to reject paying fees for advice, reflecting a growing divide between those prepared to pay for advice and those who are not.
Awareness of the upcoming rule changes in the UK is still low. The survey finds that 84% of people are unaware of RDR and that from next January UK consumers will have to pay a fee for advice. Unsurprisingly, the survey found that 54% would refuse financial advice if charged a fee; 47% would be likely to reduce the number of times they use financial advisers if charged a fee of between £400-£600, or 3% of invested assets.
Attitudes to paying for advice vary according to wealth and where consumers take advice, the survey found. Only 3% of people with no savings would be prepared to pay a fee for advice; 14% of people with savings above £50,000 would be prepared to pay a fee.
Andrew Power, lead RDR partner at Deloitte, said: “The research indicates that many consumers, particularly in the mass market, are unwilling to pay such fees. As a result, the advice gap – the shortfall between the amount of advice required and that provided – is likely to increase as advisers leave the industry or focus on wealthier customers.
“These changes pose a huge challenge to banks, building societies, insurers and asset managers who will have to find new ways to distribute their products, and advisers who will have to persuade consumers of the benefits of paying for financial advice.”
Power added: “This is important because our research also highlighted the low level of savings among consumers. Nearly a third (29%) save nothing each month, nearly a fifth (17%) have no cash savings and almost half (45%) do not save into a pension.”