Your IndustryOct 9 2014

Cost uncertainty is biggest barrier to advice: PFS

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

Financial advisers should grasp the opportunities provided by next April’s at-retirement reforms by developing clearer and easier access to their services for those new to advice, according to the Personal Finance Society’s chief executive.

Speaking to FTAdviser, Keith Richards admitted that the government’s proposed guidance guarantee might only funnel a small percentage of people towards paid financial advice, firms and advisers should still be more pro-active in attracting new customers.

“Some already offer free consultations or give up-front, defined costs for initial meetings, and I think those are important to encourage customers to engage without commitment.

“The guidance guarantee probably won’t gather enough information to make the big retirement decisions, but an initial session with an adviser could provide a proper report, without going into full suitability or entering the regulatory process.”

Mr Richards added that this would give consumers confidence, certainty and control, helping break down some of the perception problems that have dogged the industry.

“Innovation is needed to remove the barriers to advice, which are mostly based on uncertainty around costs.”

Another issue Mr Richards was keen to tackle was the idea that the Retail Distribution Review had fuelled a move to restricted advice and outsourcing amongst IFAs.

He stated that outsourced solutions can be a good thing, but are not one-size-fits-all, with the danger coming when decisions are made on firm need, rather than customer.

“It’s a bit like risk profiling tools, they can be great, but should only be for aiding an adviser, not replacing proper due diligence.

“The regulator acknowledges that non-advised technology could play a big part in the future of the sector, but also warns that software can’t come up with all the answers.”

Mr Richards suggested that technology would help to bridge the advice gap, but is unlikely to sweep in the same way as more commoditised needs like insurance or Isas.

“Adviser remuneration levels are actually up since RDR, whilst product sales are down... that means people are buying expertise rather than execution.”

When faced with the argument over a trend towards restricted advice, Mr Richards stated that there was a complete lack of evidence, adding that this was simply an “intuitive belief.”

peter.walker@ft.com