Everyone is acknowledging the UK’s burgeoning ‘advice gap’ but few are talking about how to bridge it. That is not surprising because no one has come up with a solution, at least not in the UK.
The advice gap is the gulf between expensive, post-RDR wealth management services, restricted inevitably to an elite, and the kind of everyday, common-sense financial advice millions of consumers might realistically afford.
One of the side effects of RDR has been a collapse in mass market financial advice. The banks have hoisted the white flag and headed for the hills to regroup, most of the insurance and investment providers have done the same or are quietly building their own advice arms, and plenty of advisers have called it a day permanently.
The disappointing aspect of all this is that it turns out, after all, that the public actually wants financial advice and values it.
A survey of 2,000 people in October by the ‘find an adviser’ service, unbiased.co.uk, found that consumers still seek financial advice, despite suggestions to the contrary.
According to unbiased almost one in five Britons (19 per cent) have sought advice from an independent financial adviser in the past five years, rising to almost a quarter (24 per cent) of the nation’s over-60s. Some 29 per cent of British consumers say they have sought advice from a financial adviser in their lifetime and unbiased says banks, friends and independent financial advisers top the list of the first places for people seeking advice.
Unbiased found that the more complex a consumer’s financial situation, the more likely it was they would seek advice. Sipps, annuities and inheritance tax planning topped the areas where consumers most wanted advice and felt least confident about going it alone.
Perhaps they do not need advice so much any more for other, simpler products. Our increasingly digital-savvy population sees the internet, and the vast amount of ‘search’ information it can offer, as a daily part of life, not a new-fangled invention.
We have had personal finance websites since the 1990s, that is two decades of financial guidance and online selling in some form. Web-savvy consumers are perfectly happy searching for a good mortgage rate or a top Isa cash account. There may be little real value in an adviser being involved.
When it comes to selecting and managing a Sipp or running a portfolio, it is a different kettle of fish.
But the advice gap is about more than just finding an adviser, it is also about the affordability of advice.
Several people have asked me in the past how they can find a private bank. I often replied: Don’t worry. If they want you, they’ll find you.
That is because providing full service advice and wealth management to affluent and rich consumers can be a very profitable business.
Unfortunately the majority of the population are more Ford Fiesta (Britain’s top-selling car) than Bentley and good quality advice is simply out of reach for the majority of the population who cannot afford thousands in fees.