How to bridge an entirely predictable advice gap

The first area I will focus upon is section 3, ‘Where are the advice gaps?’ Here, the Treasury will gauge the level of advice currently available against what consumers need.

Unfortunately, while it rightly points out that the number of financial advisers has dropped at least 8 per cent since a pre-RDR figure of 26,000, it ignores the reality that the true loss from the pre-RDR number is significantly higher, standing at least at 30 per cent. The paper then states: “it appears that a number of those firms offering advice are focusing more on wealthier customers rather than the mass market”.

This is hardly an earth-shattering discovery given that the RDR effectively ended the cross subsidy which many firms had used to enable them to serve the needs of the wider community.

The sad reality is that this move away from the mass market by the IFA sector is more driven by economic necessity following the RDR than by desire. Indeed, it was an inevitable outcome about which both the FSA and coalition government were warned on countless occasions, not just by IFAs but also by many MPs and consumer bodies.

The simple fact, which regulators seemed incapable of appreciating, was that traditionally around two-thirds of IFA clients were of the social class C1 or below.

IFAs recognise more than most that young couples saving for their first mortgage, parents putting plans in place for the future of their families along with those who want to ensure a sustainable retirement income can all benefit significantly from good-quality, professional financial advice.

The questions listed by the Treasury about this section of the review are on whether respondents have any information about the supply of financial advice and the shift away from sales based on professional advice.

I am unsure of the source for the background data guiding some of the assumptions made in the review’s narrative, but I firmly believe that this is our opportunity to put the record straight on how advisers operate, who they work with and the inherent value of face-to-face professional advice.

Another question raised by the Treasury about this section of the review concerns the emergence of new technology and its role in ‘delivering advice’. Again, this is an issue upon which advisers must make their voices heard.

There is no doubt that technology can and does play an essential role in the advice process, and can be of particular value as an additional client servicing tool. However it can never be a substitute for a long-term, trusted relationship with a professional financial adviser.

Ken Davy is chairman of The SimplyBiz Group.