New research completed by bakehouse communications with partners Opinium, shows conclusively that consumers of financial products often vastly overestimate their understanding of products when buying online.

Of the 2000 nationally representative sample, those aged 18 to 34 showed the greatest ‘real knowledge gap’. This was measured by the highest levels of overestimation of their financial comprehension compared to actual understanding.  For example, when asked to rate their understanding of pensions savings, 61 % of 18 to 34 year olds said they understood the subject. The research tested their understanding with some fairly straightforward questions and alarmingly, only 10 % of these people provided correct answers.

The study also looked at confidence to buy online without a financial adviser or broker across a wide range of products. Interestingly, for every product the confidence levels were lower than perceived product knowledge but much closer to their lower actual tested levels of understanding.

The public’s awareness of new ways to receive advice is also low. For example, Robo-Advice is known to only 19% of people, and just 5% of these people said they understood what it does. Its likely use for at retirement advice is also low, with just 10% of people over 55 saying they would use it. The under 35’s are more interested with 29% of this age group likely to use Robo-Advice for their pensions savings. The research also showed the interest in Robo-Advice is skewed to higher income and wealth levels amongst consumers more likely to have used the services of a Financial Adviser. This seems to suggest that Robo-Advice may not be the solution for mass market low cost advice services for people who are unlikely to pay for’ full fat advice’.

Nick Baker MD of bakehouse reflected; The true cost of people getting it wrong in an increasingly non-advised world is something providers need to get to grips with. Our experience of measuring this for the last 2 years with a major banking client leads us to conclude that it’s a new metric which is just as important as sales conversion. Other data we have available suggests that around 25% of online buyers will misunderstand the product at the point of purchase, or think they have had regulated financial advice. The potential for complaints and miss-buying reviews is obvious.

James Endersby, MD of Opinium added; One of the interesting conclusions from this study is how bridging the knowledge and confidence gap with new propositions is not a one size fits all solution. Robo-Advice has had much discussion, but is much less likely to solve the issue as say an interactive decision tree. We would advocate a more user centric approach to content design which recognises user preferences for different types of content.


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