Bridging the advice gap, one nudge at a time

In 2015, Citizens Advice published a landmark study into this topic, The Four Advice Gaps. As the name suggests, this paper documents why it is perhaps simplistic to refer to the advice gap in its entirety.

People do not access advice for a variety of reasons, and for anyone with a passing interest in this subject, or indeed building a business to address the gap, it is an invaluable study to understand the causes.

Fast-forward to 2020 and it is obvious, to put it politely, that it has been a very challenging year. As we did last year, we repeated the Citizens Advice study to produce our own paper, The UK Advice Gap 2020.

All too often when people think of financial advice, they think ‘expensive’, ‘untrustworthy’ and ‘scam’. Changing these negative associations and promoting the positive work our industry does is crucial

As luck (if that is the right word) would have it, the consumer research was conducted by YouGov in the first week of March. As a consequence, we found ourselves with a picture of the financial health of the population, right at the point where our world dramatically changed.

Only one in 10 pays for financial advice

The research found that just 10 per cent of respondents had paid for financial advice in the past two years, which is unchanged from 2019, and 79 per cent of those (up from 77 per cent last year) said they would be unlikely to do so in future.

When asked what would need to change to encourage this group to pay for advice, 34 per cent said they would need to be sure it would save them money overall, 22 per cent would need to earn more, 28 per cent would need to trust the advice, 18 per cent would need to be sure how to pick the right advice and 15 per cent said it would need to cost less. These findings are broadly in-line with the 2019 research.

When we looked at pension advice the picture was a bit more positive. Here, over half (56 per cent) of respondents said they would seek advice when arranging a pension, albeit only 30 per cent said they would be willing to pay for that advice. For those who would not pay for advice, friends and family would be the alternative. The bank of mum and dad is expanding into financial advice, it seems.

The puzzling world of pensions

It will come as no surprise to Pensions Expert readers that the population finds our world of pensions confusing. Only 31 per cent feel confident in their ability to choose a pension product, compared with 85 per cent who feel able to choose a current account.

So, what to do about it all? The advice gap research, both from Citizens Advice and ourselves, shows that it is a mixture of issues causing the gap. For some people it is simple affordability. For others it is a question of perception and awareness. And as we are sadly finding out in this post-Covid world, many others would benefit from simple financial planning and advice to help prevent them falling into difficulties.

Out of all of the above, if there was one area the industry could, and should collectively address, it is the issue of perception.

All too often when people think of financial advice, they think ‘expensive’, ‘untrustworthy’ and ‘scam’. Changing these negative associations and promoting the positive work our industry does is crucial to ensuring that more people access regulated financial advice and make the most of their money today and for the long term.

If we can improve the perception, it stands to reason the awareness of the advice profession will also increase. As we all struggle to come to terms with ‘the new normal’, addressing the advice gap is something I feel has never been more important.

Anthony Morrow is co-founder of OpenMoney