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5.5m people could become financial advice ‘orphans’ following Retail Distribution Review

7 November 2012

  • Nearly 16m people own a financial product that will be affected by RDR, and half typically use an adviser to buy them;
  • providers can fill advice gap by developing ways to deal direct with consumers.

Research from Deloitte, the business advisory firm, indicates that up to 5.5m people could fall into the financial advice gap after the implementation of the Retail Distribution Review (RDR).  

The Deloitte survey estimates:

  • 5.5m* customers could fall into the advice gap because they will either be unwilling or unable  to pay adviser charges;
  • 16m** people own a retail investment product to which adviser charges apply and half (46%) use an adviser to buy such products.

Andrew Power, lead RDR partner at Deloitte, said:

“The RDR will affect a huge number of people in the UK, and could create 5.5m advice orphans – consumers who require financial advice but who are unable or unwilling to pay for it. Our research suggests a third (32%) of customers – particularly the less wealthy – could start doing their own financial planning, product research and administration to avoid paying for advisers.

“The challenge and opportunity for banks, insurers and fund managers is to bridge this gap by developing business models that allow them to deal directly with customers, and by offering streamlined, lower-cost advice.”

Seb Cohen, head of insurance research at Deloitte, said:

“Customers in the advice gap post-RDR with sufficient knowledge of the internet are likely to move online - proactively shopping around. Others are likely to need guidance - some form of human contact - before doing the same. Subject to regulatory constraints, there is an opportunity for providers who can cost-effectively deliver this initial guidance to savers who may lack the knowledge to go online to address their financial needs.”

Deloitte’s findings will be highlighted in the report ‘Bridging the advice gap’.

Ends

Note to editors
About the RDR
The RDR comes into effect on 31 December 2012 and changes the way retail customers pay for financial advice. Financial advisers will no longer be able to receive commissions from product providers for recommending retail investment products to customers. Instead, they will have to charge their customers for advice.

About the research
Deloitte commissioned YouGov to survey more than 2,000 UK adults to understand how consumers would react to the introduction of RDR.

Deloitte has identified four customer groups in the post-RDR advice gap comprising the disenfranchised wealthy, tech-savvy savers, mass affluent orphans and mass market orphans.

*Calculation based on identification of at-risk customer segments and quantification of at-risk segments using Deloitte Insights / YouGov survey data and ONS Mid-2010 Population Estimates

**Calculation based on 32% of adults owning a retail investment product based on Deloitte Insights / YouGov survey data and ONS Mid-2010 Population Estimates

Total sample size was 2140 adults. Fieldwork was undertaken between 30th May - 1st June 2012. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.

Media contacts

Name:
David Gwyer
Company:
Deloitte LLP
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Phone:
+44 (0) 20 7007 9879
Email
dgwyer@deloitte.co.uk

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