Wheatley hails web-based advice as answer to RDR advice gap

Innovative web-based advice models that are beginning to emerge will provide a solution for lower-value clients left abandoned in the wake of the Retail Distribution Review, Financial Conduct Authority chief executive Martin Wheatley told a panel of MPs today (10 September).

Mr Wheatley admitted to the Treasury Select Committee during the evidence session that the FCA had recognised the significant fall in adviser numbers in the lead up to January 2013 and exit of banks from the sector disproportionately hit lower-value consumers, acknowledging that this was a “concern”.

He was responding to a question from committee member Mark Garnier, who asked: “Are you seeing any evidence that the RDR has resulted in a reduction of the supply of advice to people particularly in the more impoverished end of the marketplace?”

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Mr Wheatley answered: “I do think there are some issues with the withdrawal of the mass market distributors from the retail market.

“You can question how much of it was advice before or simply sales dressed up as advice but nonetheless people below a certain size portfolio, I think most of the banks worked out and most of the advisers worked out that you can’t provide a fully advised service with less than five or six hours of work and that costs, and therefore that model we are seeing less of it.

“What we are seeing is the arrival of web-based, internet based entrepreneurial type models that are delivering advice in a different form. We are at the relatively early stage of seeing that.”

He added that some of the banks that have withdrawn are still trying to figure out how to offer advise in a cost-effective way.

When Mr Garnier asked if Mr Wheatley was alarmed by the drop-out of advisers for the lower end of the market, Mr Wheatley said it was.

He said: “Yes, I think it’s a concern. People with portfolios below 50 or 100 thousand are not getting the same sort of service that they were getting, so that is a concern.”

Figures from the Financial Conduct Authority showed that adviser numbers are starting to recover in the months following the Retail Distribution Review after dropping by 20 per cent in 12 months leading up to the changes, having risen by 6 per cent between January and July.

Figures suggest full-service advice is in more demand post-2012, particularly at the lower end of the market following the exit of banks from the sector. Figures from VouchedFor published in July showed 31 per cent of 3,000 people who have reviewed their adviser on the website have less than £50,000 in savings and investments.