Almost half of clients would move to targeted support or holistic digital advice for cost savings

New research has identified a "systemic advice failure" in workplace pensions, with insights from AdviserSoftware highlighting that consumers are willing to pay for services outside the normal scope of advice. 

AdviserSoftware, part of FTRC, states that "RDR may have inadvertently caused a systemic failure in the workplace pension advice market", but points to valuable revenue opportunities for advice firms willing to embrace broader propositions.

The survey of 4,000 consumers revealed that currently only 19% of UK adults across the UK use financial advice to manage all or some of their investments, with over half (57%) managing all their savings and investments on their own. 

42% of savers with over £1 million currently get advice on some of their assets, six times the amount of those seeking advice for all their assets (7%). The picture remains similar among those with lower levels of savings. Amongst those with £100,000 to £250,000 of savings, five times more consumers take advice on some of their assets (30%) than do on all their assets (6%). AdviserSoftware says this "fragmented approach to advice is hindering the adviser’s ability to provide the best service to their clients".

Appetite for digital solutions and a broader range of services

The research found that 47% of clients who receive advice on all their assets would move to targeted support or holistic digital advice for a 30% saving, rising to 68% for a 50% saving.

In addition, targeted support and digital holistic advice may attract non advised clients – 26% would consider either option for a 30% discount, increasing to 39% for a 50% discount.

Conversely, the survey found that additional demand for traditional advice may be overstated –  59% of consumers with £250,000+ investable assets already receive advice, increasing to 69% for those with £500,000 to £1,000,000.

The research further unveiled major generational differences in attitudes towards advice, with consumers under 45 having a far more positive perspective on digital financial advice than older consumers. The report suggests the industry could therefore be heading towards a “Golden Age of Advice”, whereby a growing cohort of consumers will seek digital advice. 

31% of consumers would already prefer a digital advice solution to telephone or in person and 8% would already opt for a fully digital solution combining an online service and an AI chatbot. A further 23% would prefer various combinations of online service with different levels of human support.  

The study also explores a broad range of services not traditionally considered part of the advice process and identifies significant consumer demand. For example, 54% of consumers with £500,000 to £1m in savings and investments said they would be willing to pay for a virtual legal service either on a stand-alone basis or as part of a wider package of services. 53% of people with £1m in investable assets showed a similar willingness to pay for such a service. Micro savings, i.e. the ability to save small amounts frequently, appeal to 61% of consumers across all age groups and the approach is as popular with millionaire as is it is to those with savings under £50,000. 

Ian McKenna, founder of AdviserSoftware.com, part of FTRC, commented: “Where a client is receiving advice on their personal savings advisers can fully analyse the asset allocation of these investments. It is far more difficult, bordering on impossible, for advisers to access the same information about a workplace pension when the employers’ adviser has placed the scheme. This is damaging the quality and accuracy of advice to consumers.

“With this research we are looking to challenge conventional thinking about the financial advice market, identify the extent of demand for targeted support and holistic digital advice and identify what consumers really want from these services.

“In this first wave of our research, we are seeing essential lessons about consumer preferences and choices. Building targeted support and holistic digital advice will involve significant spend. So, before firms commit budgets, we believe it is crucial to understand what the public want and most importantly are willing to pay for. 

“Many of the findings in this study will be shocking for advisers, pension providers and investment platforms. While it shows the extent of demand for new services like targeted support and holistic digital advice it makes clear that simply building a digital version of the existing analogue process is not the right approach and unless we change some of the ways we work these new services are unlikely to be adopted by as many as they could be.

“We have identified significant demand for financial advice, delivered in ways many advisers might not have expected. In the wake of the FCA’s recent proposals many firms will be planning new services to grasp the emerging opportunity. This research has been created to help them understand what consumers really want to equip them with insights and knowledge to inform their future models.”