Although eight in ten British adults say they are confident managing their money, in the last year almost half have run out of cash before pay day according to online financial adviser OpenMoney in conjunction with YouGov.
The report – The UK Advice Gap: Are Consumer Needs For Advice And Guidance Being Met? – found that many people who get into financial difficulties cut back on spending (60 per cent) or start budgeting/ budget more strictly (43 per cent), but a large number still dip into savings (37 per cent), borrow from family and friends (28 per cent) or take out a loan (17 per cent). Very few take financial advice (7 per cent).
The report also looked at whether the the availability of advice services has improved over the last four years, using four criteria established by Citizens Advice. It found the advice gap had worsened. Nearly 400,000 more people now fall into the ‘affordable advice gap’ – those consumers who are willing to pay for advice but think it is too expensive. The research suggests that up to 5.8 million people would be willing to pay for advice if it cost less.
There is also the free advice gap, which affects people who want advice but are unable to pay for it and are unaware of, or unable to access, free services, has increased by over 5 million people in the last four years.
The awareness and referral gap hits those who do not know where to get advice. This has also increased by over 5 million people since 2015. The preventative advice gap affects those for whom non-money issues can impact their financial position. Up to 20.8 million people have fallen into the preventative advice gap at least once in their life, but this gap is getting smaller.
Anthony Morrow, CEO of OpenMoney, said: “Our research tells us that, although the majority of people claim to be comfortable managing their money and planning their financial future, in reality a high number are struggling to keep on top of their monthly expenses. Many are prevented from fulfilling some of their desires due to monetary constraints. Yet very few are taking financial advice, even though when they do, the experience and outcome for both free and paid-for advice is largely positive.
“It is clear that many more people would benefit from taking financial advice and the reasons why they don’t are not as straightforward as it being too expensive, or individuals not having enough money. ‘Robo-advice’ is often touted as filling the mass market advice gap, but while some digital providers now offer one-off advice, many simply offer online investment management without real financial advice and personal recommendations. Without offering personalised ongoing advice, these digital wealth managers cannot replace the service provided by advice professionals.”
Morrow said bridging the various advice gaps requires the financial services industry to work together with financial guidance organisations and a wide range of bodies including the Government, FCA, local government, employers and medical professionals to improve awareness and take up of existing financial support.