Drewberry periodically survey the general public to find out what they actually want when they’re seeking our advice.
With our latest survey of 2,000 workers revealing that more than 62% of people who had received financial advice said they were better off as a result, it’s safe to assume customers value advice when they get it. So given this, in just which areas are consumers most likely to seek advice and how much are they willing to pay?
Feathering their nest eggs
The public wanted financial advice the most when it came to mortgages and pensions. Both are long-term financial commitments that will have a significant impact on customers’ lives for years to come, so it’s no surprise that 46% of survey participants would seek mortgage advice and 43% would seek pension advice.
For insurance, though, only 9% of survey participants were interested in receiving financial advice. This may be because consumers equate insurance with products such as car insurance: short-term contracts that are often well understood and easily managed via price comparison websites for the masses.
Yet there are a number of long-term policies, such as Critical Illness Cover and Income Protection, where an adviser would be of considerable value to customers. With the Financial Conduct Authority (FCA) recommending in a May 2016 Occasional Paper that “millions [of individuals] would ideally have some form of income protection”, the importance of such policies cannot be overstated.
Neither Critical Illness nor Income Protection policies are as simple as the insurances customers are most used to purchasing (e.g. car insurance), however. Adviser expertise is therefore important to guide customers through the sales process so they avoid the common pitfalls that often trip people up when they’re buying this type of cover. Not buying own occupation cover for Income Protection is a key trap that befalls many unwary consumers, for instance, one that advisers know to help them avoid.
It’s not just in areas such as mortgages and pensions that advisers can make customers better off.
Office space: not over overheads
Today’s technology has allowed companies to cut costs by reducing their physical footprint. Retailers close bricks-and-mortar stores in favour of boosting their online offering, for example. In such an environment, advisers might also be tempted to offer services remotely. Videoconferencing lets advisers beam themselves into their clients’ laps while the client sits in the comfort of their living room, which could make having office space just for client visits seem less of a priority.
Yet judging by consumer sentiment, this would be one cost-cutting measure too far. Far too far, in fact: almost 9 in 10 survey participants wanted to receive their financial advice face to face, while just 6% would consider taking advice from an adviser using videoconferencing.
With customers most likely to seek advice on mortgages and pensions – important, long-running financial instruments – it’s no wonder that consumers would rather talk things through with their adviser face to face before making their decision.
What do we want? Financial advice! How much will we pay for it...?
Drewberry asked consumers what they’d be willing to pay for a financial adviser to optimise their various savings and pensions and provide them with a tax-efficient portfolio to provide a favourable retirement income. 74% were willing to pay for advice in these circumstances.
The ceiling price for financial advice most customers were willing to pay was £500. More than half (54%) said that they would pay between £1 and £499 for advice; only 21% were willing to pay £500 or more, even when considering a scenario where they’d have their optimal retirement income afterwards.
Interestingly, it was those furthest from retirement – aged 18 to 24 – who were willing to pay the most for financial advice in these circumstances. Appetite for financial planning is generally seen as being more prevalent in older clients with more complex finances, but the average amount adults aged 18-24 would pay for financial advice in the above situation is £585. This means the young are willing to outspend those approaching retirement (the over-55s) by more than £200, even though older adults tend to require more of advisers’ attention.
Despite the majority of people being willing to pay for advice, it remains that more than 1 in 4 people (26%) said they weren’t willing to pay anything. This figure is actually quite low considering the broad income and wealth diversity of our 2,000 strong sample. The main issue is in being able to deliver affordable financial advice to the masses.
As advisers, we take as a given that paying for financial advice usually makes people wealthier than those who don’t. With some studies putting customers who receive financial advice at 30-50% better off than their peers who received no advice, perhaps we need to find a better way of communicating the true value of paying for advice and try to encourage a regime in which it can be provided more cost-effectively to a wider audience.
Author: Tom Conner