Perceptions of commission bias still cloud public opinion of financial advice five years after major regulatory shake-up

• 81% of UK adults haven’t sought professional financial advice[1] with the main reasons cited being a preference to deal with money themselves, admitting they have never thought about it and believing they are not wealthy enough to warrant it
• Some 26% of those who have not sought out financial advice cited an unwillingness to pay fees for it as a factor and a further 16% were deterred by the assumption “advisers are motivated by commissions”
• Of those that have sought out advice, the most common reason (37%) was to help preparing for retirement
• 25% of people cite internet searches as the main way they get financial “advice”, while 21% seek out the views of friends or family
• 30% say the financial services industry is less trustworthy than 10 years ago and only 11% think it is more trustworthy

New research from leading wealth management group Tilney has revealed the continued challenge the financial services industry faces in shifting entrenched public perceptions despite major regulatory changes to improve transparency and professional standards. Tilney commissioned research amongst 2,000 UK adults which found 81% had never sought professional advice, which ranked behind internet searches and the views of friends and family as the main a source of financial advice.

While a third of those respondents who had never sought out a financial adviser stated this was down to a preference to look after their money themselves and a similar proportion had never thought about it, a sizeable minority (16%) cited mistrust of advisers and a belief they were “motivated by commissions” as factors. In fact commissioned-based finance advice in the UK was banned over five years ago as part of a major regulatory overhaul called the Retail Distribution Review which fees now levied instead. This perception of continued commission driven bias was particularly evident amongst the 55-64 year old pre-retirement age group where the view was held by 26% of those who had not sought out advice.

It would also appear that the 2008 financial crisis, which saw a collapse in trust in the banking industry, continues casts a long shadow with only 11% of the population believing the financial services industry is more trustworthy than it was a decade ago. Indeed, nearly a third (30%) believe it is less trustworthy than in 2008, and 38% believe there has been no change.

Amongst those who have the sought out financial advice, the most common reason for having done so was to seek help preparing for retirement. The options for funding retirement have become in many ways complex in recent years as access to defined benefit pension schemes has declined and investment risk and uncertainty has shifted to individuals. Greater flexibility over how pension benefits are taken and more restrictive allowances for some savers are other factors that underpin the need for retirement planning advice.

Jason Hollands, managing director of Tilney, said: “The research shows that despite major regulatory reforms to improve transparency and bring an end to commission based financial advice, it takes many years to shift deeply entrenched opinions. “While there will always we be those who feel confident enough to the make their own decisions or who are simply unwilling to pay any fees for advice, there are undoubtedly a great many people who have simply not considered taking regulated financial advice but would benefit from it. Bad advice from a well-meaning family member or friend or inaccurate information located from a web-search offers little in the way of protection if things turn out badly. Much work needs to be done to highlight the value of sound financial advice in helping people get better outcomes on their savings and investments and in so doing achieving peace of mind.”

[1] Excludes mortgage advisers. Includes financial adviser, wealth managers and private client stockbrokers.