Advisers facing ‘significant challenges’ as clients go against recommendations

Financial advisers are facing significant challenges as some clients are going against their recommendations and withholding information, creating an ‘honesty gap’, according to Scottish Widows.

It found that 23 per cent of investors were disregarding their financial advisers’ recommendations.

Around a third (34 per cent) chose to ignore the recommendations because they had held back relevant information that the adviser could not factor in.

Scottish Widows said that as the quality of advice was dependent on the accuracy of information clients share with advisers, its findings indicated a “worrying” honesty gap.

This was not the only factor leading to decisions to ignore advice, with 33 per cent of those disregarding recommendations stating that they felt the advice they received was not right at the time for them.

More than a quarter (27 per cent) were not clear on the outcome of their adviser’s plans, while 28 per cent felt the advice they received went against their values.

Nearly three in 10 (29 per cent) said they had chosen to follow the advice of family and friends over their adviser.

Scottish Widows also found that use of artificial intelligence (AI) to support financial decisions was growing in popularity.

Almost two thirds (63 per cent) of investors were considering low-cost, AI-powered services to help with basic financial planning.

Advised investors were more likely to utilise such tools for basic planning needs (72 per cent), while a quarter were very likely to consider this option if it was available.

Almost half (49 per cent) of investors saw AI as a good starting point for financial planning but planned to continue using specialist, human-led advice for the more complex elements.

Over a third (36 per cent) would prefer to engage with real-life advisers from the start, and just 9 per cent said they would prefer no human contact at all.

“The ‘honesty gap’ remains a significant challenge for advisers,” said Scottish Widows intermediary wealth director, Jenny Davidson.

“When people withhold or overlook key details, it can directly affect the quality and relevance of the financial advice they receive. And while friends and family may feel like a natural first port of call, their guidance may lack the professional and impartial expertise of regulated financial advice.

“Ultimately, effective advice only works on trust - and without transparency, there is a real risk that individuals make decisions that could lead to poorer financial outcomes.

“One of the potential benefits of AI is clients may feel more comfortable opening up and sharing information they may hesitate to disclose face-to-face. However, the human element remains essential for navigating more nuanced decisions.

“As trust in AI-powered tools grows, the need for openness and confidence in the advice process remains just as important. AI will play a role in the future of advice, particularly for Targeted Support and more transactional needs.

“However, the strongest outcomes are likely to come from a human-in-the-loop approach - enhancing, rather than replacing professional expertise for clients with more complex investment requirements.”

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