People falling into the financial advice gap tend to be described as those who would benefit from financial advice, usually to support their long-term financial needs, but who are unable to pay for it.
Research from OpenMoney and YouGov, published today (May 22), showed a growing number of consumers are falling into the "advice gap" and that three of the four different kinds of ‘gaps’ identified by Citizens Advice in 2015 had increased in the past four years.
Nearly 400,000 more people now fall into the "affordable advice gap", which affects consumers who are willing to pay for advice but think it is too expensive, and 5.8m people would be willing to pay for advice if it cost less, according to the report.
The "free advice gap", which affects people who want advice but are unable to pay for it and are unaware of, or unable to access, free services, increased by more than 5m people in the past four years.
The findings also showed up to 19.8m people who feel they would benefit from free advice have not received any in the past two years.
The third gap, the "awareness and referral gap", affects people who do not know where to get advice.
The report showed the number of consumers falling into this gap has increased by more than 5m people since 2015. As many as 15.2m people who would benefit from free advice were not aware of public financial guidance, according to the findings.
Finally, the "preventative advice gap", which involves those for whom earlier access to advice could stop non-money issues impacting their financial position, is the only gap that has not seen an increase in the past four years.
The study found up to 20.8m people have fallen into the preventative advice gap at least once in their life, although this is down from 23m in 2015.
The industry has seen the rise of ‘robo-advice’ over the past decade and this is often seen as a solution to the "advice gap", as by using technology to replace certain human functions, these providers can offer a more cost-effective route to investing.
But the report stated that while some digital providers now offer one-off advice, many "simply offer online investment management" without real financial advice or personal recommendations, and concluded that digital wealth managers "simply cannot replace the service" provided by human financial advisers.
Last week, Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said the role of the adviser would not be ‘usurped’ by robo-advice any time soon as the technology was not able to deal with real life cases.
This was after Investec announced it had decided to close its investment robo-advice business following two years of losses.
The Financial Conduct Authority recently signalled its intention to look at the advice gap in its call for input on the review of the Retail Distribution Review and the Financial Advice Market Review, asking how consumers access advice and guidance and about barriers to making services more affordable.
Anthony Morrow, chief executive of OpenMoney, said: "It is clear that many more people would benefit from taking financial advice and the reasons why they don’t are not as straightforward as it being too expensive, or individuals not having enough money.
"‘Robo-advice’ is often touted as filling the mass market advice gap, but while some digital providers now offer one-off advice, many simply offer online investment management without real financial advice and personal recommendations.
"Without offering personalised ongoing advice, these digital wealth managers cannot replace the service provided by advice professionals."
Mr Morrow said bridging the advice gaps required the financial services industry to work together with financial guidance organisations and a wide range of bodies — including the government, the FCA, local government, employers and medical professionals — to improve awareness.
The sector also needed to encourage the take-up of existing financial support and promote the benefits of protecting consumers’ financial futures through money management, financial planning and, crucially, suitable financial advice, according Mr Morrow.
imogen.tew@ft.com
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