Just 1 in 10 consult an IFA - but should advice be mandatory?

Among the 43.5% who have taken out a financial product in the last two years, approximately 1 in 10 (11.2%) had been influenced by an adviser, equivalent to approximately 2 million people.

However 2.7 million people took out a financial product in the last two years without collecting any information at all.

The ILC-UK reveal that best buy comparison websites most influenced decisions about which product to take out, followed by information from providers.  

In making product decisions 6.1 million people were influenced by “Best buy information, comparison website or shopped around a lot of different sources”.

Approximately 2 million were influenced by an IFA, and roughly 3.9 million were influenced by “Information collected from providers or providers websites”. About 1.7 million were influenced by friends or family.

The ILC-UK analysis reveals that older (age 55+) consumers are significantly more likely to influenced by IFAs or providers, than by best buy information on websites.

Homeowners are also significantly more likely to be influenced by an IFA when choosing to take out a financial product. While only 1 in 16 renters (who have taken out a financial product) are likely to be influenced by an IFA, the proportion rises to 1 in 8 for homeowners.

There is greater awareness of the value of IFAs amongst those purchasing potentially risky investments. ILC-UK find that the proportion of people influenced by IFAs doubles for people buying these products.

The number of people not collecting any information or just relying on friends and family before taking out a financial product is large – about 4.4 million. Among them, older consumers (aged 75 plus) tend to be over-represented.

ILC-UK point out that those who are burdened by debt do not reach out. Among consumers who felt burdened by debt (approximately 17% of the sample), only about 1 in 8 (or 12.7%) received any advice at all to help them deal with their debts, and among them, 3 in 5 received advice from a free agency.

Cesira Urzì Brancati, Research fellow at the ILC-UK said:

"The demand for independent financial advice is mainly driven by trust. We will not expand access to advice without action to raise trust in advice.

"Sadly, advice too often does not reach those who need it the most. For some, however, overconfidence is an impediment to getting advice.

"Making financial advice mandatory may not have good results. Experimental evidence from the US showed that unsolicited advice has no effect on investment behaviour – only those who want advice and ask for it will act accordingly.

"Our research highlights again the importance of Government and industry supporting a mid retirement financial health check. We need to ensure that people making important financial decisions in their 70s and beyond, get the support they need”.