Research from Deloitte suggests over half of consumers would be likely to reduce the number of times they used an adviser if they were charged 3 per cent of their investment.
A report from Deloitte on “Bridging the Advice Gap”, published today, estimates there will be up to 5.5 million customers who will stop using or lack access to financial advisers post-RDR as a result of adviser charging. The proportion represents 11 per cent of UK adults.
Based on an online survey of 2,140 UK adults, Deloitte found 87 per cent of customers who bought a savings or investment product via a bank adviser in the past three years assumed the advice process was free.
The research found 33 per cent of those polled with less than £50,000 and 32 per cent of respondents with more than £50,000 said they would stop using advisers altogether if they were charged for advice.
Some 56 per cent said if they were charged a fee of between £400 and £600, or 3 per cent of their investment, they would be likely to use advisers less.
Willingness to pay adviser charges was influenced by the type of adviser, with less than 2 per cent of customers who have used bank advisers, websites or internet forums, or employer-provided advisers prepared to pay a one-off fee of £300 for advice.
But the proportion of people prepared to pay a £300 one-off fee rose to 9 per cent where respondents were IFA clients, and to 14 per cent for accountant or solicitor clients.
Asked how they would react to being charged for an adviser’s time, almost a third said they would do their own planning, research and administration. A further 27 per cent said they would stop taking advice while another 27 per cent said they would bypass the adviser and go direct to the provider.
Some 24 per cent said they would use advisers less and only pay them when it comes to making important financial decisions.
Deloitte suggests banks are most likely to see customers decline post-RDR, as they are the biggest player in the mass market, where customers are least willing to pay for advice. Over half of respondents felt bank advisers are too sales-orientated, and 34 per cent said they did not trust advisers working for banks and building societies.
The company says providers who want to continue to focus on adviser distribution will need to develop strategies to “win” the best advisers.
Deloitte says: “Assessing the likely winners and losings among advisers, and which of the winners are best placed to support their distribution strategy, will be a key activity for those seeking to continue with adviser-led distribution.”
It says providers will need to consider “how to compete for winning advisers, for example, via product manufacturing processes that allow advisers to offer tailored products to high-end customers, or via software which increases the quality of adviser service.”
The company adds providers will also need to consider which advisers are unlikely to succeed post-RDR who are not differentiated well enough from competitors in terms of scale or quality of service.