A new blog from the trade association the Personal Investment Management & Financial Advice Association confidently states that “professional financial advice has the power to fundamentally improve the quality of life for those who access it”. In support of this, PIMFA refers to many studies which have shown that consumers who use financial advisers have significantly higher retirement incomes. It also cites a survey which showed that 86% of people who sought financial advice believed it to be a beneficial experience.
The blog lists the benefits of financial advice as:
- Those who receive advice are “generally more confident”
- Customers of advisers have higher financial literacy
- Those who seek advice also have higher levels of personal wellbeing
The article then goes on to highlight one of the major issues facing the advisory sector, in that many of the general public do not understand the benefits of obtaining advice. It mentions another survey in which only 10% of respondents said they had paid for professional advice. Of those who had not engaged an adviser, 79% said that they had no plans to pay for advice at any time in the future.
The reasons cited for this unwillingness to receive advice include:
- A lack of understanding of the benefits of advice
- A general lack of trust towards members of the advisory sector
- Concerns over the perceived cost of advice
PIMFA goes on to blame the Financial Conduct Authority for introducing mandatory annual reviews of investment portfolios, with the Association suggesting that this has forced firms to decline business from less wealthy clients.
The blog also highlights two areas where costs have risen significantly, with 45% of respondents to its own survey saying that their Financial Services Compensation Scheme funding costs have more than doubled during the last five years. 26% of respondents said their Professional Indemnity Insurance premiums had doubled over the same period.
Finally, the blog calls for:
- The Treasury to review the definition of financial advice
- The regulator to allow the industry to develop lower-cost advice models
- The Government to include protection from scams and other financial harm in its new Online Safety Bill
- A requirement for public organisations to signpost consumers to financial advisers