The long-term potential for the advice sector lies in the mid-market, according to a report by Surrey-based actuarial firm AKG.
The 48-page report, called Pension Freedoms: Clearing the hurdles to business success in the retirement income market, said that following RDR there had been a move towards the top end of the market
But it said the industry was deluding itself if it thought D2C was the only solution for mass-market consumers.
It said: “The emerging area is represented by those businesses that are trying to plug the gap between guidance and advice, and this is set to be the most fascinating area of development and innovation over the next few years.
“While the cost of providing holistic financial planning services to these clients would not be appealing to either the client or the adviser business, there is most definitely an opportunity for the provision of cost-effective transactional advice.
“The market is now starting to see the early signs of this, and once a price threshold has been set, others will seek to enter the fray in what could become an extremely competitive market segment.”
The report added that a successful mid-market advice market could inadvertently put pressure on the cost for fuller advice.
Matt Ward, head of communications at AKG and author of the report, said: “We anticipate that 2016 will be an extremely interesting year indeed for the broad range of market stakeholders seeking to capitalise on retirement income market opportunities.”
One area where the report has found a particularly evident advice gap is in equity release and long-term care.
The report said there was a potential mismatch emerging, with provider interest in equity release increasing but no noticeable corresponding interest from financial advisers to provide equity release services.
Yvonne Braun, the ABI’s director for long-term savings policy, said: “We are just three months into the biggest overhaul in pensions for a generation, which was introduced in only one year. So some issues remain that need to be worked through, in particular around financial advice.”
Adviser view
Paul Howard, owner of Berkshire-based Box Financial Planning, said: “Larger or more established firms will believe they can make profits from existing or new clients where the initial value is much higher, which is a shame, and I disagree.”
