The advice gap: the stats that matter

In my first article on the lang cat’s new Advice Gap report we identified some of the barriers which contribute to the advice gap. 

But we’ve only just scratched the surface. There are loads of stats still to be explored in our report which tell us even more about why people do or don’t take financial advice.  

There’s so much to the advice gap, it’s pretty complicated, and if we’re going to get to grips with it we need to know the details. And in case you didn’t know, we love a stat at the lang cat so we’re happy to get our paws stuck in and take you through some of the more interesting facts and figures from the report. Let’s get digging.

The perception gap

Some of the most striking results that emerged from our research are how differently people perceive advice, and the value and benefits it can bring, depending on whether or not they have actually received advice.

It will come as no great surprise that a much smaller portion of our survey respondents had received paid for advice compared to those who had not (11% vs 89% to be exact). Satisfaction is notably high amongst this smaller cohort, with 88% believing it represents good value for money. 

And when asked about their experience of advice, around half said they were able to get help quickly and at a time that was convenient to them, so perhaps room for improvement here. However, more encouragingly almost nine of out ten said they found the advice either very, or fairly, helpful.

All in all, a pretty glowing report in favour of financial advice. But the picture starts to look less optimistic when we ask those who haven’t paid for advice the open-ended question: “What word(s) come to mind when you hear the words ‘financial advice’?”

In terms of sentiment, 26% of responses were positive, 47% neutral and 21% negative. And words such as “commission, “untrustworthy” and “expensive” feature heavily amongst the negative responses.

If people need to pay for  advice before they’ll recognise its value at all, then suddenly it’s very easy to see how the advice gap has become a tricky issue to resolve.

Changing minds

So what would it take to convince more people to seek paid for financial advice? 

When we put this question to people who haven’t paid for advice in the last two years and are unlikely to do so in the future, trust has an unsurprisingly big role to play. Over a third (38%) said they would need to be sure they could trust the advice. 

Just behind this, 37% told us they would need to be convinced the advice would save money. And a quarter (24%) said they would need to feel certain of how to pick the right financial adviser.

The awareness gap 

A lot of the issues around the perception of advice are closely linked to peoples’ awareness of it, including how advice works and the potential benefits it can bring, as well as knowing how to find the right advice. 

This becomes clear when we look at the sources of information people have turned to for financial advice. Amongst those who have received paid for or free specialist financial advice, referrals account for two fifths (42%) of respondents, including recommendation from friends, family and organisations. Meanwhile 35% chose to undertake their own research. 

When we asked people who are unwilling to pay a professional where they turn to for financial advice, the results are fairly similar. Almost half (45%) would ask their friends and family, while a similar number (48%) would rely on their own research. 

Reassuringly, only 4% would rely on social media (including influencers), although this rises to 21% of 18- to 24-year-olds.

Having a source for referrals clearly has the potential to make all the difference in helping people overcome the trust barrier and find the right adviser. But as we can see this sort of situation is still very much in the minority. 

The need to do more as an industry to champion advice and encourage referrals is therefore a simple but potentially very powerful takeaway of our advice gap report. 

Adviser views

Of course we couldn’t write a paper on the advice gap without getting the perspective of advisers. So we asked advisers for their overall views on the advice gap, including what is causing it as well as what could (or should) be done to address it. 

Amongst the verbatim responses, the biggest chunk (42%) contained a degree of concern towards the cost or profitability of stepping outside of the typical portfolio sizes in order to serve lower value clients.

Meanwhile a quarter of respondents mentioned the regulator in their response to the question and 18% of comments referred to education as an avenue to narrowing the advice gap, beginning as early as the school environment. 

Next up comes technology, with 8% of responses highlighting that better tech would play a part in addressing the advice gap, unlocking additional capacity among the profession. 

That last point is an important one because it highlights that the advice gap cannot be tackled by advisers alone. Providers, platforms and back-office tech firms all need to create more efficiencies for advisers - whether that’s through increased digitisation, integrations or new technology yet to be discovered - freeing up capacity so they have more scope to support first time clients as well as existing customers. 

The good news…

The advice gap has never been a simple question of who is and isn’t taking advice. That’s why detailed stats like we’ve covered here are so vital to really understand what drives people to take advice, and also what stops them from doing so. This knowledge can help to drive change.

Yes, affordability is still clearly a major cause behind the advice gap but as we’ve seen, it is by no means the only issue. 

There is a lot more that could and should be done to improve the perception, availability and accessibility of advice, whether it’s better integrations between the different components of the industry or doing more as a sector to shout about advice. 

Admittedly there is still a lot of work to be done but let’s round things up on a positive note and end with a killer stat. Our research found that if trust can be improved, an additional 3.12 million people would pay for advice in the future. I’ll leave that one with you for now.