Freedoms revisited: where do we go from here? is the latest research paper to be published by AKG.

As the report highlights and I’ve previously discussed, the impact of  pension freedoms has been seismic, creating a raft of opportunities and challenges across the industry.

Of course, regardless of the freedoms revolution and the demands on advisers, ensuring good outcomes for consumers has always been at the heart of advice.

However for a wide variety of reasons, and as the AKG paper calls out, too many consumers, especially those approaching retirement, just don’t seek help from an adviser.

A key factor, I think, is the society-wide issue the industry still wrestles with and that is that advice is perceived as part guidance, part product push. It’s both a legacy of the past and because a very small number of players may still not act in consumers’ best interests, which attracts undue attention from the press.

However, the FCA’s Consumer Duty, in force next year, should go some way to continue to restore trust across the financial services industry and support more buy-in from consumers wanting to engage with advisers.

A need to highlight what advice is  

During their lifetime, the most complex financial decision consumers are  most likely to make is what to do with their pension pot which they’ve spent over 30 years building up. Apart from a mortgage, it will be the largest amount of money most will ever have to deal with.  

So seeking help from an adviser is important, especially at retirement.  And as I see it, consumers don’t just want guidance about what they could do with their retirement savings. Instead, they want to be told what to do, to avoid costly mistakes, and that’s what advice is. 

For quite some time now, I believe there’s been a fundamental lack of understanding about what advice actually means and given that the advice market has evolved so much over the past three decades, the industry needs to address this.

Again, the Consumer Duty will play a part here. The regulator makes it clear that in order to deliver good outcomes for consumers, ‘it’s the responsibility of all parts of financial services, including platforms, fund managers and government agencies, to highlight what advice is and why it’s so valuable.’

Consumers have very different needs

Although advisers are great at promoting what they can do for clients, the industry has to shift perceptions away from advice being sales-related to it being a service that can support people's hopes and tackle their fears.

For me, just being really clear about what advice delivers can lead to more buy-in from consumers wanting to engage with advisers. Some evidence for this is provided by the responses to a question posed to consumers,  in  AKG’s research paper around the factors that would encourage them to pay £1,000 for advice.  

Although 31% of those questioned say no factors would encourage them to pay this amount for advice, it means 69% would be willing to pay £1,000 for some form of advice. It strikes me this is a massively different response from all those previous surveys reporting that people would not even pay £400 for advice.

I suspect the logic, from the remainder of the responses to the question in the AKG paper, is that it’s clear consumers have varied needs with different reasons for their willingness to pay for advice - whether it’s to deal with the cost of living crisis or to put a plan in place to make sure their retirement savings can last until the end of their life.

As I see it, the industry should be thinking really carefully about the language it uses to articulate what advice is and what consumers want.  

And for me, what they want is to be told what to do with their money. Consumers want a service that they have the choice to pay a sum up front for, that can then help them to work out what their options are to get back on track financially and give them that peace of mind.

Technology is a big part of the future of advice

The government’s Money and Pension Service does good work to promote the benefits of advice, but there’s huge opportunity for providers to support advisers to develop more cost effective and efficient advice solutions, not only to support more good consumer outcomes but to help fill the advice gap.

The workplace also has the potential to really drive how the value and diversity of advice is communicated. Employers should be considering how they promote advice as a service for employees, especially for those nearing retirement.

And technology will be key.

Throughout the Covid-19 crisis, it was technology that helped advisers to continue to deliver a seamless experience to clients and helped firms to develop a business model that’s future-proofed with the chance to provide more efficient advice solutions to appeal to all generations.

The opportunities are there to be taken

Technology will also be critical to help with the streamlining of advice costs  while providing partly-automated advice solutions to help personalise consumers’ outcomes. Because at its core, advice is a personal recommendation and this is never more important than at retirement when needs are fundamentally different and consumers require a personalised outcome.

Of course technology can’t provide clients with that reassurance and peace of mind that advisers can, so advice can never be fully automated.

In one of the conclusions in Freedoms revisited: where do we go from here?, AKG calls on the industry to encourage more consumers to seek help for good outcomes to avoid them making important decisions without support.

The opportunities for the industry to better articulate the value and diversity of advice and to develop more digitally-enabled advice solutions have never been more ripe.

Download a copy of AKG’s Freedoms revisited: where do we go from here?

The value of investments can go down as well as up and your clients could get back less than they paid in

The views expressed in this blog should not be regarded as financial advice