Consumers don't know what they get from their advisers says Consumer Panel

20 July

Consumer Panel research, published to coincide with the FSA's annual public meeting on 21st July, shows that many consumers don’t know what their advisors offer or how they pay them.

The main findings are as follows:

• Consumers are confused about the services they get from advisers – even when questioned before the recent changes to the rules on the numbers of firms advisers can represent (known as ‘depolarisation’). Almost a third (29%) thought that their ‘independent financial adviser’ was only able to advise on a restricted range of companies’ products.
  

• There was also confusion about paying for advice: 20% of those who had used an Independent Financial Adviser did not know if or how they had paid them.. Although fees are starting to be paid: 12% of people who bought products regulated by the FSA said they had paid fees for advice.
  

• However, customers value the idea of independent advice. 62% thought they had had very good advice from an adviser who covered the whole of the market, compared to 20% of those who had used advisers tied to one company.

Other findings highlighted in the report are as follows:

• Fewer people are buying products linked to the stock market - only 9% of consumers had bought investment products in the previous 12 months, compared to 14% in the 2000 survey.
  

• People do not shop around for financial products: 56% only got a quote from one company before buying, while 33% neither shopped around themselves nor used a broker to act on their behalf.
  

• The use of internet shopping is growing, but purchases are still largely made face to face, with many consumers heavily reliant on financial advisers. Half the purchases were made after taking some form of financial advice, with one in eight people leaving the choice of product completely up to their adviser.

Chairman of the Consumer Panel, Ann Foster, said:

"This highlights the big challenges in getting the right messages across to consumers. At a time of major change in the way that financial advice can be given, the FSA and the industry must ensure that consumers are aware of how they are paying for their advice, and whether people are tied, multi-tied or independent in the advice they are giving. The FSA's Key Facts initiative is a good start. But the FSA and industry must promote it properly and evaluate its effectiveness."

Notes to editors

1. The Consumer Panel is publishing today the first in a series of 3 research papers resulting from fieldwork that took place between 9th November and 19th December 2004. 1,073 interviews were conducted by BMRB with adults aged 18+ living in the United Kingdom. The paper is available on the Consumer Panel's website – www.fs-cp.org.uk.

2. The FSA established the independent Financial Services Consumer Panel in December 1998 to advise its Board on the interests and concerns of consumers and to report on the FSA’s performance in meeting its objectives. The Consumer Panel has statutory status. The FSA must consider its representations and, if it disagrees with a view expressed or proposal made in the representation, it must give the Panel a statement in writing of its reasons for disagreeing.

3. The emphasis of the Panel’s work is on activities that are regulated by the FSA, although it may also look at the impact on consumers of activities outside but related to the FSA’s remit.

4. The Consumer Panel brings together a wide range of relevant experience. This includes financial services regulation, working with vulnerable consumers, consumer protection, consumer education, front-line money advice, legal expertise, competition policy, public policy analysis, market research and media.

5. There are currently fourteen members of the Panel as listed below. For further information on individual members, see About the Panel.

   Ann Foster (Chairman)
   Dianne Hayter (Vice Chairman)
   Caroline Gardner
   Harriet Hall
   John Howard
   Tony Hetherington
   Stephen Locke
   

   Nick Lord
   David Metz
   Adam Phillips
   Paul Salvidge
   Robert Skinner
   Carol Stewart
   Richard Taylor