The exact shape and cause of the advice gap has been debated for many years now, so it is right the government explores ways to fill this gap through the Financial Advice Market Review and considers how to address the shortfall between people’s need for help with financial planning and the accessibility of advice and guidance.
But as it publishes its call for input today (12 October), the FAMR must understand the full extent of the problem if it is going to be a success.
In a new report out later this week, we highlight how there is more than one piece missing from the advice puzzle.
Our evidence from across the Citizens Advice network and research with consumers shows that there are instead multiple advice gaps.
At Citizens Advice we know how important it is to get the right advice or guidance at the right time, and how a lack of support when making financial decisions can have devastating consequences.
Last year we provided people with face to face help on over 1.7 million money-related queries such as debt, pensions, mortgages and how to choose an IFA.
In addition, during the last six months alone over a million people have turned to our website looking for help around debt or financial products.
Our new study recognises that price has been at the heart of the advice gap debate among industry, regulators and consumer bodies. Consumers are willing to pay for advice but not necessarily at current prices for the services they require.
The Retail Distribution Review brought positive changes in terms of increased transparency and greater protections for consumers. It has also led to some of the more innovative products which are now emerging, for example the development of digital tools to deliver advice.
But RDR also exerted upwards pressure on the costs of advice, exacerbating the price gap problem.
The price of advice is a fundamental part of the conversation as it is this that will affect who is willing and able to get financial advice. But there are other elements of this debate that need to be addressed and one which is very relevant to intermediaries is around awareness and referral.
Many people are not aware of the different types of support which are out there to help them plan their finances, whether investment advice from IFAs or help with debt from the voluntary sector.
There is a real opportunity for different groups to explore how clients can be referred between services, to strengthen their access to advice.
There is clearly important work to be done here, by financial institutions, IFAs and the free money advice sector, as consumers should be able to move between advice services, according to their needs.
An IFA can help a client with a complex pension problem, but if they have an underlying financial issue, then they may also benefit from free debt advice.
Flowing in the other direction, Citizens Advice has found that a significant proportion of people who have a Pension Wise appointment with us report that they plan to pay for advice after receiving their free pension guidance.
Our longstanding Moneyplan project with the Personal Finance Society, where people seeking help from Citizens Advice on matters such as mortgages or pensions have the opportunity to get advice from an IFA on the type of products that could help them, also demonstrates the value of closer working.
Our research also highlights that many people are not accessing free advice because of a lack of knowledge and understanding of what help they can get with planning their finances.
This means opportunities are being missed to give people preventative advice which would protect them from financial issues at a later stage.
The FAMR needs to start from a point of considering who would benefit from advice, whatever its form, identify who does or doesn’t get it and ask why this is.
The government, intermediary sector, financial institutions, consumer bodies and charities must ensure the debate is focused on the needs of consumers of financial services who want help to make the right decisions for their future.
Citizens Advice is speaking to firms about how we can work together to address these and the other gaps we have identified to ensure that people get the right guidance and advice which can be key to securing their financial future.
Gillian Guy is chief executive of Citizens Advice
