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Fee-based Advice in Financial Services: The Consumer Perspective Product Image

Fee-based Advice in Financial Services: The Consumer Perspective

  • Published: April 2012
  • 55 pages
  • Datamonitor

Across many national markets there is a shift towards the provision of unbiased and transparent financial advice. The introduction of fee-only advice in markets such as the UK will be a change for consumers and may dissuade some from seeking advice.

Executive Summary

Introduction

Consumer willingness to pay for advice is a key issue in a number of national markets as calls for increased transparency and changing regulation make this a pressing topic. A legacy of so called "free" advice makes any shift towards a fee-only model a big change for many consumers. Providers therefore must understand what a target segment of consumers want and need from financial advice.

Features and benefits
- Boost take up of fee-based advice by learning what consumers are looking for from a professional financial advice service.
- Improve customer acquisition with insight into the perceived barriers to seeking financial advice.
- Strengthen relationships with consumers through discovering the key concerns over their finances.

Highlights
The willingness of consumers to pay for advice will be affected by their previous experiences of financial advice, their expectations, READ MORE >



OVERVIEW
Catalyst
Summary
Methodology
INTRODUCTION
Professional advice helps consumers to make important financial decisions
Professional advice can help to make better informed decisions
Consumers with limited financial intelligence will benefit from professional advice
The UK advice market is awaiting a major shake-up in regulation
All models of advice have advantages and drawbacks for consumers
Commission-based advice models may be biased towards the best-paying products or providers
Fee-only advice models shift the focus onto the suitability of a product for individual consumers
Paying a percentage of assets under management may also introduce bias
There is a move towards a fee-only model to increase transparency for the consumer
Consumers have access to numerous sources of financial advice
Banks are the main source of financial advice globally
Independent financial advisors can offer consumers a broader view of the market
Peer-based advice offers consumers a "tried and tested" point of view
Fee-only models will target more affluent consumers
Affluent consumers will be the most able to pay for advice
Providers of advice must consider both income and assets
Consumer willingness to pay for advice is driven by a number of factors
Convenience will play a part in where consumers go to seek advice
Consumers need to trust the advice that they receive
Consumers will find alternatives to any move towards a fee-only model of advice
The cost of advice will have a clear effect on consumer willingness to pay
STRATEGIC CONTEXT
In the target segment the majority of consumers have sought financial advice in the past
Most consumers turn to their primary bank for financial advice across all markets
Consumers seek face-to-face meetings with their financial advisor
The majority of consumers have not paid a fee for financial advice in the past
Savings and investments is the most popular area of financial advice among target consumers
Half of the consumers in the target segment are likely to seek advice in the near future
Target consumers in France are the most likely to seek financial advice in the next six months
Target consumers will continue to turn to their primary banks for financial advice
Funding their retirement is a pressing concern for consumers in the target segment
Consumers in Singapore show the highest levels of concern for their personal finances overall
Australian consumers are most concerned about their retirement income
Swedish consumers view retirement as their key concern
Retirement income and savings and investment needs are of equal concern to consumers in the US
Spanish consumers are concerned about their day-to-day finances
Target consumers in the rest of Europe demonstrate similar patterns of concern
Target consumers must be made to understand the benefits of professional advice
Australian consumers are among the least likely to have considered seeking financial advice
Target consumers in the UK must be made to consider seeking financial advice
Trust is a key issue for target consumers in France, Germany, and Italy
In the US consumers are concerned that they do not have enough money to make advice worthwhile
Target consumers need advice to ensure that they hold the correct products
Pension holding is low given the concern among target consumers over their retirement income
Target consumers have a high holding of savings accounts
Target consumers have taken steps to protect themselves financially
STRATEGY IN FOCUS
(Untitled section)
Any move to a fee-only model of advice will see considerably more consumers paying for advice
The UK RDR regulation will act as an example for other markets
Advisors will need to explain the benefits of the fee-only model to consumers
Paying a fee for advice has produced more satisfied customers
Banks should continue to offer advice in the UK market
Target consumers in Australia are already the most likely to pay for advice
A continued move towards a fee-only model will also require an awareness campaign
Paying a fee does not affect levels of satisfaction among Australian target consumers
High levels of concern over finances in Singapore should be a driver for seeking advice
Target consumers in Singapore should be made to consider financial advice
Consumers who paid for advice are more likely to seek further advice
Target consumers in Singapore should use financial advice to address their concerns over personal finances
Transparency and unbiased advice is a growing concern in the US
US consumers need to be educated about financial advice
Independent advisors have a strong opportunity in the US
Organizations are already selling the idea of fee-only advice
French consumers will continue to be reliant on the bank channel
Advisors may use a fee-only model to increase their market share
Ongoing economic uncertainty will act as a driver for advice in the French market
The German advice market is continually moving towards greater transparency
German consumers have an appetite for financial advice
Fee-only advice is relatively well recognized in the German market
Trust is a major barrier to any model of advice in Germany
Target consumers in Germany are willing to take advice from online resources and blogs
Fee-only advice could be used to restore trust in financial advice in Italy
Inheritance advice has been a key issue for Italian consumers in the past
Trust in financial advisors is an issue within the Italian financial advice market
A fee-only model advice could raise the profile of independent advisors in the Spanish market
Independent advisors have an opportunity to attract more customers
Spanish target consumers are as concerned about their day-to-day finances as they are about more long-term hurdles
Consumers in Spain must be made to consider seeking professional advice
Swedish consumers are likely to welcome greater regulation of financial advice
Swedish consumers are the least likely to seek financial advice in the near future
Trust is the most common reason for Swedish consumers not seeking financial advice
APPENDIX
Additional data
Methodology
Secondary sources
Further reading
Ask the analyst
Disclaimer
TABLES
Table: Defining criteria for consumers in the target segment, by income and liquid assets
Table: What areas did you discuss with your advisor? (if more than one, please select all that apply)
Table: Consumers in the target segment who have previously sought financial advice (%), June 2011
Table: Competitor type for target consumers who have previously sought financial advice (%), June
Table: Method of communication with an advisor for target consumers (%), June
Table: Target consumers who paid a fee for the advice that they received (%), June
Table: Likelihood that target consumers will seek advice in the next six months (%), June
Table: Potential competitor types for target consumers who are likely to seek advice in the next six months (%), June
Table: Areas of concern over personal finances among target consumers in Australia (%), June
Table: Areas of concern over personal finances among target consumers in France (%), June
Table: Areas of concern over personal finances among target consumers in Germany (%), June
Table: Areas of concern over personal finances among target consumers in Italy (%), June
Table: Areas of concern over personal finances among target consumers in Singapore (%), June
Table: Areas of concern over personal finances among target consumers in Spain (%), June
Table: Areas of concern over personal finances among target consumers in Sweden (%), June
Table: Areas of concern over personal finances among target consumers in the UK (%), June
Table: Areas of concern over personal finances among target consumers in the US (%), June
Table: Reasons why target consumers have/will not seek financial advice (%), June
FIGURES
Figure: Consumers' primary banks are the most popular source of advice globally
Figure: A number of factors will affect a consumer's willingness to pay for financial advice
Figure: The majority of consumers in the target segment have sought professional advice in the past
Figure: Banks are the most commonly used channel for advice in all markets
Figure: Consumers prefer to meet their advisor face-to-face
Figure: A fee for financial advice is most likely to have been paid in Australia
Figure: Almost half of consumers in the target segment are likely to seek financial advice in the next six months
Figure: A consumer's primary bank remains the most likely channel for consumers to use if they seek advice
Figure: Retirement income is the most pressing concern for target consumers in the majority of markets
Figure: Lack of consideration of advice and a lack of trust in advisors are the main reasons that target consumers choose not to seek professional financial advice
Figure: Private pension holding is low given the consumer concern over retirement income
Figure: The vast majority of consumers in the target segment hold one or more savings accounts
Figure: Consumers in the target segment have given consideration to their life cover
Figure: Providers of advice need to expand the proportion of consumers who are willing to pay a fee for advice

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