Richard Freeman, chief distribution officer at Old Mutual Wealth and part of the FAMR working group, sees the new allowance as “recognition of the advice industry”.
Mr Freeman says: “I think, at last, we’ve got the Treasury, regulator, [and] everyone is aligned saying there is an advice gap, advice is a good thing, and recognising that consumers have to pay for it when they take regulated advice.”
However, despite the change, many advisers still consider the allowance to be restrictive, given the annual limit remains £500.
Simon Webster, managing director of Kent-based Facts & Figures Chartered Financial Planners, says: “It’s potentially helpful as an idea, but what the regulator doesn’t recognise is that every pension provider in the land has got to rewrite their software, re-calculate their sums, and do all sorts of things to work out how they’re going to provide for this marvellous allowance that the government’s just pulled out of thin air, with no consultation with the industry.”
While Mr Webster recognises that some advisers could provide some form of advice for £500, he doesn’t believe it will be enough “to make a huge amount of difference”.
He adds: “We charge £250 per hour, but we’re chartered financial planners, so that gives [a prospective client] two hours of our work. That’s probably enough for a basic review, so you could argue that it has some advantages for some people.”
Old Mutual Wealth’s Mr Freeman contends: “It’s difficult to get full advice with £500 on its own. But now you’ve got access to probably close to £1,000 across a tax year, and perhaps a top-up in the future, I think it’s another good step.
“A lot of our advisers are willing to sit down and have an exploratory meeting upfront that probably doesn’t cost £500, so I think we’re almost there.”
As well as in-person regulated advice, the allowance can also be used for robo or automated advice. However, as so few advice firms have the capacity to deliver such services, as well as the fact the new advice definition has yet to be set, the likelihood of consumers using their allowance for robo-advice remains relatively low.
The question of where to draw the line between guidance and advice, seen as crucial to closing the advice gap, encouraging innovation, and giving advisers piece of mind when it comes to interacting with clients, has proved difficult for FAMR to answer.