Regulator must 'lead the way' on advice gap

Olivia Bowen joined Manchester-based Castlefield in 2011 after the company bought Gaeia, the small ethical advisory practice where she was a director.

Having started at Gaeia in 1999 after graduating from Manchester University, first as an administrator then as a qualified adviser, Bowen said being a financial planner was such an "amazing" career for young people to consider.

But she warned that unless the government and regulator "led" the way, then her two passions - sustainable investing and financial planning - would not get the traction that is needed. 

It would have been good for the regulator to get onto this a couple of years or even a decade or so.Olivia Bowen, Castlefield

Indeed, she believes those two strands - sustainability and planning - go hand-in-hand with getting more young people into the profession to help close the advice gap. However, she said there was still too little being done "at the top" to make this a reality.

Speaking to FTAdviser, Bowen said: "I have only ever worked in ethical investment and financial planning. I have seen, over the past two decades, attitudes towards sustainable investing change significantly within our profession and among advised clients.

"But people in general are used to doing what they have always done. If we had more younger advisers coming through, we would have seen a more strategic regulatory attitude to both closing the advice gap and promoting sustainable investment. 

"The government and regulator need to lead in many areas of society. In general, it is quite typical that you only get a big change if people are forced to change their habits.

"The most important thing is that a drive to improve sustainable disclosure should have happened before. It would have been good for the regulator to get onto this a couple of years or even a decade or so."

Consumer duty

Bowen welcomed the incoming sustainability disclosure requirements, which are expected to be set out in detail later this year.

As reported by FTAdviser, commentators had expressed disappointment at what they felt was a delay to the implementation, although Castlefield is more sanguine believing this is a sign that the regulator is thinking things through carefully. 

However, in the meantime, Bowen said other changes, such as the new consumer duty regulation, would help to promote questions of sustainability and values-based investing at the start of client conversations.

She said: "Clearly, as an industry, we have to know our clients. So, if you know your client you should already be asking them about how they want to invest, and whether values-based investing is important to them.

We knew what was going to happen with the Retail Distribution Review around the corner.

"We should have been doing that already, regardless of consumer duty."

When asked what sort of questions open up those conversations, Bowen said it was not "that hard" to bring the subject into the consumer's views - because the consumer, the client, should be at the heart of the conversation from the start.

Castlefield has an ethical questionnaire as part of the fact find, which aims to discover what sort of areas clients might be interested in supporting and avoiding. 

She said while this was not a complete list, merely "indicative", it did allow clients to talk about what is important to them.

"This means we can have meaningful conversations with them, embedding this in our knowledge about them, and it can be put on file."

Advice gap

But Bowen said "more to the point is that there simply are not enough advisers" in the UK to start having those sort of conversations with more people in the first place.

She said: "We knew what was going to happen with the Retail Distribution Review around the corner. It hasn’t been addressed and robo-advice is really a red herring, as it is just presenting investment options.

"It is not advice - it is helping people make investments, but financial planning is so much more than that."

Financial advice is bespoke and intricate and expensive, she said, but she could not see how simplified advice could address it.

She says: "Clearly as an industry, we are going to have to develop more tech and AI to address the gap."

She added: "Again, the regulator is going to have to lead the way to help people move from pure transactional financial choices towards holistic planning.

"Even if you had a form of simplified advice based on AI, who will pay for the technology? Is it just the vertically-integrated firms?

"But even with a transaction, you need a clear structure about blame and accountability and responsibility, and only regulation can provide reassurance around this, making sure this is not open to abuse."

simoney.kyriakou@ft.com