Financial education is playing a key role when it comes to the advice gap, according to research by the Lang Cat.
In its Advice Gap Report 2023, published today (May 11), the Lang Cat asked advisers of their views in general on the advice gap, what is causing it and what could or should be done to address it.
The biggest chunk of responses (42 per cent) contained a degree of concern towards the cost or profitability of stepping outside of the typical portfolio sizes outlined previously in order to serve lower value clients.
A quarter (25 per cent) of respondents mentioned the regulator in their response to the question.
However, the next biggest segment related to education, with 18 per cent of comments outlining that one avenue to narrowing the advice gap begins as early as school years, with financial education from primary school to the workplace playing a key part.
Speaking on a panel discussion at the report’s launch today, Sally Plant, head of financial planning at the Chartered Institute for Securities & Investment said one of the aspects of the report that stood out to her was around education.
She said lots of professional bodies and trade bodies are trying to improve financial literacy within schools but the key question is when does that literacy benchmark information need to come?
“Is it at school level or is it perhaps more at age 30 level so people understand what planning is,” she asked. “This is so they understand what advice is good advice and how they access it.”
The research, which was conducted by YouGov in February 2023 with a total sample size of 2,035, found that the majority (88 per cent) of those who take ongoing financial advice said it represents value for money, and that figure is almost the same (86 per cent) for those who have received one-off advice.
However, of those who did not pay for financial advice in the past two years, 70 per cent said it was unlikely they would do so in the future.
One of the barriers was trust, with almost two-fifths (38 per cent) saying their lack of it would need to change for them to seek advice.
Plant said: “Obviously we all have a big role to play in improving consumer confidence but much of that comes down to education, and many of us are trying to do something in that space.
“We really need to focus on what point that education needs to come because it's a continuous conversation to improve trust. It's not a one hit wonder.”
She added: “I've got three children all in school and I know that if someone went in and spoke to them just once about improving financial literacy, budgeting and having a basic understanding, it might not have the same impact. It's that repeated message to improve the competencies, not to be a one hit wonder.”
Attracting talent
One way to tackle the advice gap would be through attracting and recruiting more people into the industry but it needs to be a collective effort, according to the panelists.
Plant said a lot of the CISI’s member firms have helped by offering work experience.
“Next year, we'll run more and regional firms can get involved but I think the biggest problem is people still don't know what the profession is,” she said.
“It is an ongoing challenge because in comparison to things like accountancy and law, unless you use a planner or your family knows a planner, it is not a profession you fall upon.”
Ross Liston, chief executive officer of M&G Wealth Advice, said: “There are many different interpretations of the advice gap, but core is we have too few advisers in the country and not enough people are willing or able to access affordable advice services in a way that best suits them.
“This must be addressed and as people have options that can suit their circumstances trust is enhanced and important needs addressed.”
The Lang Cat report highlights several key findings, perhaps most of all the collective need as an industry to work together.
Liston said: “This straddles education and opening as many options as possible for people to access financial advice in a way that best suits their circumstances, developing innovative technologies to deliver increased value, offering a range of advice options, and increasing numbers of financial advisers.
“It is critical that the industry works as one to deliver this."
sonia.rach@ft.com
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