The advice gap in the UK is widening with just 9 per cent of the population having benefited from paid financial advice, a report has found.
Research by the Lang Cat found the number of people paying for advice has fallen from 11 per cent to 9 per cent in the past year, despite the introduction of the FCA’s consumer duty.
The survey revealed 80 per cent of advisers believed the regulation has actually made it harder for them to service clients.
This has particularly impacted those with low investable assets, with 55 per cent of advisers having stopped serving them as a result.
One adviser quoted in the report in relation to this, said: “The time cost of advice regulation is far too high for us to be able to consider taking on non-commercial/ low-value clients and every new set of rules issued by the FCA tends to increase the advice gap.”
Some 20 per cent of advisers said they would actually turn away a potential client who only had £20,000 to invest, with half saying they would only serve them under strict conditions like having a familial tie with an existing client.
Speaking at the launch of the report today (July 3), Mike Barrett, consulting director at the Lang Cat, explained: “We know from the conversations we have had with advisers that consumer duty has been a catalyst for change within their businesses.
“It has required firms to think about their target market, to document the products and services they are going to send to that target market and to ensure that they are fair value. So adviser firms’ approach is now more refined and focused than it has ever been.”
In terms of who is responsible for closing the advice gap, advisers ranked regulators first followed by the government as having the highest responsibility for doing this.
“Most people, including advice professionals, actually say there are wider and bigger themes at play here to try and solve the advice gap,” explained Steve Nelson, insight director at the Lang Cat.
Advice/Guidance boundary review
The research also revealed that 34 per cent of advisers said although the FCA’s proposals for simplified advice was not something they would be able to offer, they could see other firms successfully implementing that proposition.
Some 19 per cent of advisers said the proposals would not reduce the advice gap however 14 per cent did say their firm was likely to develop a proposition.
Barrett explained: “There are some firms who are going to get behind these changes and potentially develop new services. There is a majority who are not and are fairly ambivalent about it.
“And perhaps in a lot of cases, there is a nagging doubt that actually there is a risk that if the regulation was not well thought through it could start to cannibalise some of the existing work that financial planners are doing really well."
