From the Ed: There's always something handy in the small print

The FSA published its annual consumer survey last week. It’s often a dull read – mainly because little ever changes in the public’s perception of providers, products and the FSA.

Nor is it a particularly insightful read. According to the report, most people think the FSA does a good job and believe banks treat their customers well and handle complaints fairly.

The results screamed of indifference. Perhaps the FSA needs to offer respondents the chance to win an iPad 2.

But there are always nuggets. This time, consumers were asked to risk-rate a select few, fairly standard, financial products (I should point out here that these were individuals who did not own any of the products on the list).

A quarter of more than 2,000 individuals did not know whether to categorise equity ISAs as low, medium or high risk. It was a similar proportion for with-profits bonds, while less than half said they thought direct investment in shares was a high stakes venture.

These are worrying figures and further underline what we have all known all along: that education is everything in financial matters.

But advisers said the figures were both unsurprising (“this is precisely why people consult IFAs”), and, in one or two instances, encouraging, because they highlighted the need for advice.

Here’s the rub: it is true the figures highlight the public’s need for professional financial advice, but it is also true that they do not seek it. Only 17% of respondents had sought any type of advice (i.e. including from banks) in the preceding 12 months.

So the supply, and need, for financial advice is there, but the demand for it is not. Should these individuals ever choose to buy, say, a with-profits bond, not only are they unlikely to call on the services of a professional adviser before they do, but they are also unlikely to buy a suitable product.

But there was an even more worrying finding: Almost 40% of those who did own one of the products said their tolerance for risk was… zero.

Barely a week seems to go by at the moment without further proof of the need for financial advice.

Scott Sinclair

Editor, Professional Adviser and IFAonline.co.uk