There are consumers that are not getting advice that may have done prior to the introduction to the Retail Distribution Review, Martin Wheatley has acknowledged, but he said this issue remains the biggest challenge for regulator as it struggles to quantify the so-called ‘advice gap’.
Speaking at an FCA roundtable update on the first year of the RDR, Mr Wheatley, chief executive of the City conduct watchdog, said it had faced problems because it was essentially “trying to measure something consumers are not doing”.
He added that it was challenging defining which consumers were not taking advice directly as a result of the RDR and which were no longer taking advice for other reasons.
Concerns over the advice gap have grown in recent months as a number of surveys have been released suggesting that those with smaller pots of investible assets of less than £50,000 are often deemed not to be economically viable by advisers.
Two separate surveys from the Association of Professional Financial Advisers and Schroders found that clients were being turned away or even asked to leave practices, with potentially 60,000 prospective clients left without recourse to advice as a result.
Numbers published today (13 January) showing a further substantial drop of 23 per cent in the number of bank advisers and a modest overall decline are likely to further stoke these fears.
The then Financial Services Authority came under fire at the end of 2012 when it admitted it had done no work in the lead up to the RDR on how many clients may be left without access to advice as a result of the switch to fees and the exit of banks from the advice sector.
In April of this year, Colin Wilcox, a member of the FCA’s RDR implementation team, said the regulator was struggling to quantify the advice gap, suggesting that it would probably fall in the middle range of industry estimates and thus equate to a figure in the low millions.
Mr Wheatley did sound a note of optimism by pointing to the emergence of innovative business models would emerge to fill the advice gap, though he said it was disappointing that this ingenuity is solely coming from smaller firms with little coming from nationals and networks.
He said: “We are starting to see it a bit but frankly not much at the larger end.”
Over the past two weeks FTAdviser has revealed details of two online advice portals that have been developed by separate IFA firms in an effort to offer a full advice service to small-pot investors.
Launched on 6 January, Monibox Ltd is an online authorised representative of IFA firm Proactive Financial Management which charges a £300 flat-rate annual fee people who are new to investing or existing investors who have pensions, Isa and bonds.
In contrast, the yet-to-be-launched increaseyourpension.co.uk is the first of four websites being opened by Cardiff-based Penguin Wealth and has been developed with the help of £85,000 in funds provided by the Welsh government.
It will charge no initial fees, with clients only parting with money for charges to cover any transactions they subsequently undertake. Clients can also email pension-related questions to advisers via the website.