Opinion  

Why financial advice is not a want but a need

Sonia Rach

Sonia Rach

There is a common misconception among consumers that financial advice is only for the wealthy, as a means to help them manage the abundance of money that they have.

While this may be the case for some, most financial advisers will know this is far from the truth. In fact, it is probably more necessary for those without that abundance of wealth in order to manage their money more efficiently.

I for one am a strong believer that financial advice is a need and not a want. 

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Everyone needs advice, but unfortunately in the current circumstances of the industry, not everyone can afford it. This is why we as an industry, as well as the regulator, need to step up and move fast.

Guidance

In recent weeks, the advice guidance boundary has been making headlines.

In a speech by Sarah Pritchard, executive director – markets at the Financial Conduct Authority, in September, she said one area the regulator is looking at transforming is the advice and guidance rules. 

A month later, the FCA said it was working with The Investing and Saving Alliance and the Association of British Insurers to try and gain some practical examples of areas where the advice and guidance boundary is not working.

At the time, Pritchard said she wanted to make it clear that the legislation around the advice and guidance boundary “is not going to change for the time being”.

“What we have said is that we want to have a holistic review of the boundary between advice and guidance because this is an issue that has been raised over a number of years,” she said. 

Following that, earlier this month Tisa called on the government to urgently review the legislative framework around firms’ permissions to deliver financial guidance to consumers. 

In a report titled "The keys to unlocking greater investment in stocks and shares Isa", it found that while information exists around stocks and shares Isas and the savings options that consumers have, more than 70 per cent do not even consider saving in an Isa. 

One of the key reasons was that people thought the product was not for "people like me". 

Tisa said prompting more people to consider these Isas could result in several benefits, such as facilitating levelling up across disadvantaged areas, reducing the gender gap and facilitating social mobility. 

All of the above, specifically Tisa’s research, combined with the recent economic turmoil with interest rates, is a clear demonstration of why advice is a necessity. 

Vicious cycle

So what exactly is the problem? Well, it’s the domino effect.

There are not enough advisers to go around which therefore means those that are there can take on fewer clients and are selective with the minimum amount a client needs to invest. After all, it is their livelihood.