The Association of British Insurers (ABI) is today calling for a fundamental rethink of how financial advice and guidance operate. It comes as nearly three-quarters (72%) of people say they will not pay for financial advice.
Polling* commissioned by the ABI found four times as many people wanted one off financial advice (46%) instead of the traditional model of ongoing fees (12%).
Today at the ABI's conference "Future-proofing the pension freedoms: what next?", ABI director-general, Huw Evans, will call for a fundamental rethink of the regulatory environment to facilitate new forms of advice and guidance so it is fit for purpose for the next 15 years.
With millions of people exercising unprecedented freedoms to make retirement choices, we need a system of guidance and advice that helps the majority, not a minority."
Changes are needed to shift the advice and guidance boundary and to enable customers to get advice that it is simpler and more affordable, or guidance that offers more help. Currently, the financial guidance pension providers can give to consumers is limited.
The FCA's work on the financial advice market review and consumer investments market provide an opportunity for reform and to enable advice that is simpler, more accessible and fit for the future.
Reform of advice and guidance will enable providers, trustees and the Money and Pension Service to help customers more effectively when choosing what they want to do with their pension. This will be vital for consumers in the current era of low interest rates and increasing reliance on Defined Contribution schemes for retirement.
The research shows that consumers have mixed views on how they want to receive financial guidance, suggesting there needs to be a range of options available to suit individual needs. The most popular option for accessing information was through a government website (29%) followed by pension provider (25%), family (23%), online information (22%) and Pension Wise (21%).
The past five years have seen major changes to the long-term savings market, not least with the introduction of the pension freedoms which opened up a range of new opportunities for customers.
Evans commented: "With millions of people exercising unprecedented freedoms to make retirement choices, we need a system of guidance and advice that helps the majority, not a minority. When people have saved all their working lives for their retirement, it is not good enough to allow most of them to make complicated judgements about drawdown rates, annuity options and pension options with very limited help."
"This is a shared responsibility for providers, regulators, advisers and government bodies. With the Brexit transition period coming to an end, the FCA has a uniquely timed opportunity to devise a system suitable for UK pension freedoms that ensures the majority of savers have access to either guidance or advice as they take decisions that will shape the rest of their lives."
Gemma Harle, manging director of Quilter Financial Planning said the figures reveal a "crucial challenge.""With 72% of people unwilling to pay for advice there is a clear need to change the perception and understanding of advice and financial planning and the value it offers. At the same time, advice needs to evolve to be given via different channels, such as telephone-only or online that can be delivered as a simplified service in a cost-effective manner to a wider public."
She added: "Encouragingly, the FCA has started to look again at guidance and simplified financial advice as part of its call for input on the Consumer Investment Market. This momentum must not be lost as it is critical for the financial wellbeing of the nation that the regulator, government and industry work together to ensure we can deliver the financial support people need."