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Consumers to reject paying fees for financial advice

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Consumers are generally unwilling to pay a fee for financial advice, according to a survey of more than 2,000 people conducted for Deloitte by YouGov.



The survey found that 84 per cent of people are unaware of the Retail Distribution Review and that consumers will pay a fee for advice when RDR is implemented on 31 December 2012.

More than half of all consumers (54 per cent) would refuse financial advice if charged a fee.
 
Almost half (47 per cent) would be likely to reduce the number of times they use financial advisers if charged a fee of between GBP400 and GBP600 or three per cent of invested assets.

Attitudes to paying for advice vary according to wealth and where consumers take advice. Only three per cent of people with no savings would be prepared to pay a fee for advice; 14 per cent of people with savings above GBP50,000 would be prepared to pay a fee.

Bank customers are five times as likely (60 per cent) as IFAs’ (12 per cent) customers to reject paying fees for advice.
 
Andrew Power, lead RDR partner at Deloitte, says: “The RDR comes into effect on 31 December 2012 and financial advisers will be required to charge their customers a fee for advice rather than being paid by commission. Deloitte’s 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.”
 
RDR comes into force from 31st December 2012, and changes the way consumers pay for financial advice. Commission paid to financial advisers will be banned and replaced by advisers charging, where consumers pay advisers a fee for advice.

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