A new paper from the think tank argues that the main obstacles to consumers accessing financial advice are economic rather than regulatory.
Responding to the Treasury and Financial Conduct Authority’s Financial Advice Market Review, it suggests a new framework of advisers would be subsidised taxpayers and the industry, assisting those savers currently not profitable for most IFAs to service.
“Financial policymakers and regulators can’t do much about the fact that many households are on low incomes and can’t afford to save,” read the report.
“But, even with major efficiency gains, large numbers of consumers will always be commercially unviable for financial services firms.”
Instead, it stated: “We support the creation of a national financial advice network to provide advice, guidance, and information to consumers who are not commercially viable for the for-profit financial services industry,” adding that this must involve some form of cross-subsidy either from the public purse or from the industry.
The Financial Inclusion Centre stated that while the regulator should seek to reduce the burden of regulation on advisers, this will not be enough to make advice affordable.
“We cannot identify any significant regulatory requirements which demand standards of behaviour over and above those that would be expected of a well-run firm that sought to understand the needs of its prospective customers, communicate fairly and openly, and provide a professional, quality service.”
The organisation dismissed suggestions that firms which meet existing regulatory standards will be judged retrospectively, noting “we are not aware of any cases where regulators have reinterpreted and applied regulations” and that “regulators have made it clear on a number of occasions that firms and advisers are judged by the standards of the time”.
The report also stated that calls for a safe harbour for firms and advisers are intended more to protect them from mis-selling claims, than being genuine attempts to close the advice gap.
“Arguments put forward by certain financial services industry representatives seem to be somewhat disingenuous,” the paper read. “Cutting corners and protecting firms and advisers from potential redress claims simply transfers the risks of and liability for mis-selling to consumers - an illusory efficiency gain and, ultimately, a false economy.”
It concluded that great care must be taken not to reduce regulatory protection in a “misguided attempt” to encourage the provision of advice to consumers who are currently not commercially viable for or under-served by the financial services industry.
“Instead, the industry would continue to serve medium-higher income consumers but with weaker constraints on its behaviours. The overall effect would be to just transfer the risk of mis-selling to consumers which will undermine confidence and trust in financial services.”
The think tank’s report comes a week-and-a-half after the Financial Advice Market Review input paper was published.
The paper suggested a long stop for adviser liability and questioned whether robo-advice could fill the advice gap.
peter.walker@ft.com
