With little over a week until the Retail Distribution Review comes into force, a new Financial Services Authority study has revealed that a worrying proportion of UK consumers are still labouring under the misapprehension that financial advice is free.

In findings which are a pretty damning indictment of the recent educational efforts of the financial services industry, the UK regulator found that 33 per cent of UK adults believe financial advice is free. Such people are in for a rather large shock once the RDR reform package kicks in and bans commissions in favour of pre-agreed fees. Under half (43 per cent) thought that financial advice entailed a cost (either upfront, or on a monthly or annual basis), while the remaining 28 per cent were unsure of whether advice was free or not.

This general ignorance is even more startling when we consider that of the sample of consumers 17 per cent currently receive advice from a professional financial advisor. It would seem that a failure to “read the fine print” is as endemic in financial services as it is elsewhere.

Commenting on the FSA’s findings, Andy Zanelli, head of retirement planning at AXA Wealth, said that the results were “worrying, but perhaps not surprising”.

As he points out, the proportion of those surveyed who believe advice to be free will include those who have indeed been advised and “may not have appreciated they were paying”.

“People may have long believed financial advice to be free, not fully understanding fees and commission, but this has never been the case. This belief has no doubt contributed to the significant devaluing of advice and the scenario, in a post-RDR world, where people say that they simply cannot afford to pay for financial advice. This may lead to consumers choosing to go it alone,” said Zanelli.

The FSA’s findings follow on from warnings issued by Deloitte suggesting that up to 5.5 million consumers will fall into an “advice gap” once the RDR comes into force at the end of the year. The consultancy, like several other parties, is of the view that many consumers will be unable - or at any rate unwilling - to pay advisory fees. In the latter case it seems that there are psychological barriers to paying for something which was previously “free”. It could also be that investment advice is still not regarded with the same degree of professional reverence as the legal and accountancy professions.

One aim of the RDR is of course to up the professional standing of the financial advisory sector by making advice more transparent and objective. The need for this is amply illustrated by the fact that the FSA found that 38 per cent of consumers said they would never consider taking financial advice from a professional advisor.