Fewer People in the UK Pay for Financial Advice due to Cost and Lack of Trust – 91% of Those Who Do Find it Helpful

A new study from financial consultancy the lang cat has revealed that only 9% of people in the UK currently pay for financial advice, down from 11% in 2023. This decline has led the lang cat to question the effectiveness of the Financial Conduct Authority’s (FCA) Consumer Duty regulation, which was intended to provide better outcomes for consumers.

The study, titled ‘Advice Gap,’ includes YouGov research involving over 2,000 British adults and fieldwork by the lang cat with over 200 financial advisers. It found that, contrary to its goals, Consumer Duty has made it more difficult for advisers to service clients, with 80% of advisers reporting increased challenges. This trend particularly affects individuals with low investable assets, with more than half (55%) of advisers ceasing to serve this demographic. Many advisers have instead focused on wealthier clients approaching and transitioning through retirement, driven by the regulation’s requirement to target products and services at the most suitable consumers.

Mike Barrett, consulting director at the lang cat, noted that Consumer Duty has led to significant changes in the advice sector. He explained that the regulation’s mandate for a clearly defined target market and fair value has naturally pushed advisers to offer their services to clients with substantial assets and complex needs. Barrett clarified that this shift is not a criticism of the profession, as advisers run businesses and are not responsible for implementing social policy. However, he emphasized the need for changes to ensure broader access to financial advice and support.

The study highlighted cost as the main barrier preventing people from seeking paid advice, with 20% considering it too expensive. This concern has now surpassed trust in the profession as the primary deterrent. When asked what would need to change for them to pay for financial advice, 31% of customers cited trust, down from 38% last year, potentially reflecting the impact of Consumer Duty.

Barrett added that the advice sector broadly supports the FCA’s work on the Advice Guidance Boundary review, though most firms do not plan to develop new services alongside their existing full advice offerings. He urged the next Government to ensure the FCA accelerates this work from consultation to final policy, enabling consumers who cannot access traditional advice to receive help with their increasingly complex financial needs.

On a positive note, the data shows that 91% of those who pay for advice find it helpful, a 14% increase over the past two years. Additionally, 56% valued the service, and more than a third (37%) reported that the advice gave them peace of mind about their financial future.

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