Cost of advice is major sticking point for consumers

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  • Aegon calls on the government and FCA to consider ways to highlight the value of advice as part of its consultation
  • Consumers are reluctant to pay for advice until they have a pot worth £121,000
  • Consumers will only part with £191 for advice on a pot worth £50,000

New research from Aegon reveals that UK consumers are reluctant to pay for advice until they have an investment or pension pot totalling nearly £121,000. However, this figure comes in at four times the £30,000 advisers believe is required to make advice worthwhile. 

Just 6% of the adult population agree with the adviser community that a savings or pensions pot of £30,000 is worth paying for advice on.

When it comes to how much the UK is willing to spend on advice, there is little correlation between the value of the assets and how much people are willing to pay. When faced with deciding where to invest £50,000, people are willing to pay, on average, £191 for advice.  However, when it comes to deciding where to invest a pot of £250,000, people are willing to pay £314, just £123 more, despite the pot being five times bigger.

The government and FCA are consulting on how to extend financial advice to a broader audience as part of the Financial Advice Market Review and it is apparent that it’s not just the cost of advice where adviser and consumer views vary.

There is also a difference of opinion on the main benefit of taking advice. Two fifths (42%) of consumers believe that the potential to grow their investments is the biggest advantage, followed by peace of mind that they’ve been advised by an expert (34%), while over a quarter (28%) felt the main benefit of taking advice was the feeling that they had made the best decision for their circumstances.

However, it is peace of mind that advisers see as the main benefit for consumers, both in the knowledge that consumers have been advised by an expert (63%) and also the consumers’ right to complain to the Financial Ombudsman Service if they are unhappy (42%).

Duncan Jarrett, Managing Director, Retail at Aegon UK said:

“There is a significant gap between what consumers believe they need to have saved before they seek advice, and the amount advisers believe is required to make advice worthwhile. The government’s consultation on methods of extending advice needs to look at ways of reframing consumer thinking. Take a household example, as a car gets older many people opt for an annual service which can spot potential problems early. While it involves a regular cost, it could pay you back many times over if it prevents a major expense at a later date. The same is true of advice, when people understand that the cost is potentially securing them a much more comfortable retirement or removing a major worry, then the value becomes apparent.”