The Money Advice Service will not be able to close the advice gap as lower-value, non-sophisticated clients need to be ‘convinced’ to take out products to boost their protection and savings, according to one IFA.
In fact, to address the advice gap the Financial Conduct Authority will eventually change its commission policy to encourage advisers to sell products to lower value clients, Sheriar Bradbury, managing director at chartered Bradbury Hamilton, has said.
Mr Bradbury told FTAdviser the FCA must change its policy to allow for commission or the ‘man on the street’ will not be catered for. He said the FCA could introduce safeguards by pre-approving products for sale.
He said: “I think they should re-introduce commission on investment products. I don’t think there should be caps on commission, but approving products would be a safeguard.
“If commission was reintroduced this would be an incentive to sell products to the lower end of the market. By getting rid of commission this market is no longer served as there is no incentive to make money.
“For simple products there should be commission and less compliance needed.”
Mr Bradbury does not believe that the Money Advice Service can help non-sophisticated clients, stating that instead of a decision tree they need specific advice “and they need somebody to convince them to do some things”.
Mr Bradbury said: “I think what the regulator has done with the [Retail Distribution Review] is take away the bad advice and it is much more professional now, but for the man in the street that doesn’t have very much money all that will happen is they will do nothing.
“As a result of that, you will find a massive massive savings problem in the country and it will get even worse than now.”
He added that while the motives for the RDR are laudable, they have disenfranchised lower-value clients that many of “the more sophisticated advice firms” will not service as “it’s not economic”.
Mr Bradbury said: “I think eventually what is going to happen is there will be some kind of policy change. I think they are going to have to find a way to reintroduce commission to motivate people to be bothered to sell products to the bottom end of the market.
“In the 1980s there was no regulation but the problem with that was there was ridiculous levels of commission and very poor quality products, but at least the bottom end of the market got some service.
“People could be bothered selling to them but no one can now and, as a result, lots of people have nothing to fall back on and there needs to be something done about that.”
