Results from the Financial Conduct Authority’s (FCA) Financial Lives survey also found that half of the UK public displayed characteristics of being potentially vulnerable consumers.
The report revealed that only 40% of UK consumers had confidence in the financial services industry — meaning three in five UK adults were distrustful of the industry.
It also found that 13%, or one in eight people who received advice in the past 12 months, believed their financial advisers had at one point mis-sold them a pension or investment product, and the same percentage of consumers thought they had received bad advice.
Moreover, because the survey “did not investigate past perceptions of mis-selling or bad advice with other adults who may have had regulated advice in the past,” the FCA added, “our findings will underestimate the proportion of all UK adults who perceive they have been mis-sold a product or received bad advice from an adviser.”
These results were concerning given the low levels of financial knowledge and a corresponding need for advice which was revealed.
Half (50%) of the 13,000 UK adults surveyed displayed one or more characters that signalled “potential vulnerability” — defined as being at risk of suffering disproportionately if things go wrong.
This was due to one or a combination of low financial resilience, low financial capability, health issues affecting day to day activity, or hampered ability to engage with financial services to due to experience of a recent life event (such as redundancy or divorce).
It was also found that consumers became more vulnerable as they got older: compared with the 50% national average, 69% of those over-75s were potentially vulnerable, and 77% of over-85s displayed risky characteristics.
Although the report also stressed that “potential harm does not translate into real harm for the majority of people who could be at risk”, it also found that people showing characteristics of potential vulnerability are twice as likely to have used high-cost credit in the last 12 months.
In addition to being more susceptible to financial risks, the survey also found that 24% of UK adults had little to no confidence in managing money, and 46% of respondents reported low knowledge about financial matters — with 18- to 24-year-olds rating themselves as the least confident and knowledgeable about managing money.
Commenting on this trend, the report said that the FCA was “concerned about consumers’ lack of knowledge and their lack of engagement with products and providers because these create conditions for harm to occur more readily.”
The Financial Lives Survey is the second publication in a series of documents to be released this Autumn by the FCA as a part of its focus on consumers, and follows the “Ageing Population and Financial Services” occasional paper published last month.
Later this year, the FCA will release an overarching “Approach to Consumers” strategy paper.