A report on consumer behaviour by consultancy Ignition House – produced to inform the regulator’s Retirement Income Market Study – suggested the public is unsure where to find trusted advice or judge the services they receive.
There are no visible measures to assess value, they said.
Possible indicators such as cost are seen as a “barrier to advice” rather than a sign of quality, the research found, which leads to a “tendency for consumers to revert to a DIY approach”.
The FCA’s report into the retirement income market, published on 11 December, concluded providers were not communicating with clients effectively about their retirement options, and were ignoring the code of practice produced by the Association of British Insurers.
The Ignition House report also suggested there was a “strong mistrust” towards IFAs by those yet to retire and those not currently with an adviser.
This was mainly based on “poor past experiences”, the report found, but some were also under the impression IFAs were still paid commission and “might not always work in their best interests”.
Commission on retail investment business was abolished by the Retail Distribution Review (RDR), which introduced customer-agreed adviser charging.
“They [the respondents] were surprised to hear that pension advice in the post-RDR environment would be paid for through an explicit fee, and that this could cost them in excess of £1,000,” the report stated.
Some consumers who had used an IFA before said they would consider going back but were put off by costs, especially in relation to the size of their pension pot.
Pre-retired advised customers were content with how much they paid their adviser and would be happy to continue the relationship post retirement.
Views were mixed as to whether or not advice is needed at retirement for those who had already retired, the report suggested.
Some respondents said there was sufficient information available for them to confidently make decisions on their own, while others sought advice when they felt they could not navigate the options themselves.
However, those advised clients said they had no way of telling whether the service they had received was good.