Consumer Panel responds to FSA Retail Distribution Review
by Gill Montia
The Financial Services Consumer Panel, the independent voice for consumers of financial services, has commissioned a piece of research in connection with the Financial Services Authority’s (FSA) Retail Distribution Review.
The findings show that consumers are confused by the current advice framework, with the majority not distinguishing between different types of adviser when talking about or referring to financial advice.
For example many respondents described advice they had received as “independent” even though it was provided by a tied financial adviser or given by bank sales staff.
Participants in the survey were aware that many advisers are paid on a commission basis, however, the significance of a financial adviser’s independence in terms of securing the product with the best return was not widely understood.
The research confirmed that consumers use advisers because they provide a convenient means to finding the best place to invest money.
In addition, many of those questioned like to be able to discuss their situation with a person who has experience of the financial markets.
Respondents who were less financially experienced or knowledgeable did not appreciate the value of advice because of a perception that financial advisers are only for wealthy people.
The majority of respondents would not seek advice if they had a sum of between £5,000 and £10,000 to invest because they believe the amount is too small for various investment options to make a difference to returns.
The Panel concluded that generic advice could encourage those who lack financial experience to seek advice, whilst also encouraging consumers to seek advice for smaller sums of money.
At the same time, the Panel believes that generic advice can play a vital role in shaping consumers’ expectations and providing education about other aspects of financial advice.
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