OpinionMar 13 2023

'Collaborative approach needed to fix advice gap'

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'Collaborative approach needed to fix advice gap'

The advice gap is growing but so is the number of financial advisers. 

With an ageing adviser population – more than 50 per cent of authorised or appointed representatives are over the age of 50 and that rises to 77 per cent when you include over 40 – and continued consolidation taking place, this might come as a surprise to learn.

However, those increases are relatively small and insufficient in the context of addressing the ‘advice gap’. 

Recent statistics suggest that, despite the best efforts of digital advice, propositions offering automated solutions and traditional providers lowering their minimum investment thresholds, the advice gap is growing.

Those in need of specialist advice and support tailored to their personal circumstances are evidently unwilling or unable to secure the services they need. 

At the heart of the challenge sit several issues:

  1. The availability and accessibility of advice services for those currently not receiving advice.
  2. The perceived cost of that advice.
  3. The barriers to entry that result in insufficient numbers of advisers being willing and able to broaden their proposition.
  4. The increasing complexity in financial services products and propositions leaving the retail market and consumers with complex financial situations and tax affairs, which simplistic solutions cannot address.

We should all be passionate about encouraging and supporting the next generation of financial advisers, that remains a long-term ambition that will take time to realise. The challenges are here and now. The cost of living crisis and market volatility will only further deter those already in the advice gap from seeking help. 

If the perception is that financial advice is expensive (or for the affluent), then pressure on disposable income is unlikely to result in that trend being reversed.

Neither can it fall to the adviser community alone to find solutions to address these challenges; financial adviser firms pay more in fees, cope with an increasing regulatory and administrative burden and spend more time justifying their knowledge and experience than ever before. 

The help must come from elsewhere.

It means a collective effort from providers, regulators and government to work together to build and develop solutions that support the adviser community and consumers to remove barriers to access. 

This cannot undermine the quality and sustainability of advice, nor can it sideline key parts of the process (for example, suitability, attitude to risk). Equally, there must be a sufficiently compelling incentive for all adviser firms to consider how they provide a broader range of services across the demographic. 

The Money and Pensions Advice Service, despite its best efforts, cannot be the long-term answer. Firmer action is required. Relying upon the goodwill of adviser firms to operate in places where financial returns are low is simply not going to address the problem.