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The changes being introduced under the Retail Distribution Review (RDR) risk creating a shortfall in financial advice according to research by Deloitte.
RDR, which comes into force at the end of this year, replaces commission payments to financial advisers with adviser charging, where consumers pay advisers a fee for advice.
However, a survey of more than 2,000 people conducted for Deloitte by YouGov found that 84% were unaware of the new rules and over half (54%) would refuse financial advice if charged a fee. A similar proportion (47%) would be likely to reduce the number of times they use financial advisers if charged a fee of between £400-£600 or 3% of invested assets.
Consumer attitudes to paying for advice varied, according to wealth and where they took advice. Just 3% of people with no savings would be prepared to pay a fee for advice compared with 14% of those with savings above £50,000. Bank customers were five times as likely (60%) as IFAs’ (12%) customers to reject paying fees for advice.
Andrew Power, lead RDR partner at Deloitte, said: ‘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.’
The research also highlighted low levels of savings among consumers. Nearly a third (29%) save nothing each month, nearly a fifth (17%) have no cash savings and almost half (45%) do not save into a pension.
‘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,’ Power said.
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