Experts have warned of an increasing ‘advice gap’ as a new study reveals that more than half of investors would refuse financial advice if they were charged a fee.
The majority of consumers (84 per cent) are also unaware that they are likely to be charged for financial advice when the Retail Distribution Review comes into effect on 31 December 2012.
The survey of over 2,000 people by YouGov for business advisory firm Deloitte found that 54 per cent of respondents would refuse to pay a fee, though the figure varied hugely depending on the extent of the respondent’s savings.
Only 3 per cent of people who currently have no savings would pay for advice, while 14 per cent of people with savings above £50,000 would be willing to pay a fee, with the percentage rising as the level of savings increased.
RDR will ban the commission that product providers currently pay to independent financial advisers (IFAs), meaning that the IFAs will need to levy fees directly onto their customers.
Andrew Power, lead RDR partner at Deloitte, commented, ‘Our 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.’