A ‘pay as you go’ advice marketplace has been pitched to the City watchdog as a solution to what the regulator describes as an “unmet need” for straightforward, focused advice.
Alistair Fullerton, director at Lathe and Co, has responded to the Financial Conduct Authority’s latest Call for Input and applied to its sandbox advice unit, suggesting an online platform linking consumers with advisers offering a ‘one-off’ service could bridge the gap.
The idea centres around a digital marketplace on which advisers can post the modular, specific aspects of advice they are willing to provide, such as a fund recommendation, pension snapshot, sorting out an Isa or helping with a mortgage.
Consumers can then search for the specific advice they are looking for and compare the charges and reviews of advisers who can offer it. They will then pay a one-off fee for that specific advice.
Mr Fullerton said: “There are millions of people the FCA think would benefit from advice, but cannot afford it or don’t want to get involved in an ongoing relationship with an adviser.
“If you remove the need for somebody to open an account and transfer money in, you massively open the floodgates.
“There have been a lot of attempts to bridge that gap, but it has not ignited and robo-advice has not been the solution we’ve been waiting for.”
Mr Fullerton’s pitch to the regulator comes just weeks after it raised concerns there was an “unmet need” in the market for “focused” advice.
In a Call for Input paper published last month, the watchdog said it was likely there were consumers looking for “straightforward, one-off or focused advice” based on their relevant personal circumstances who were not necessarily interested in an ongoing advice relationship.
The FCA said: “Most advice is provided on an ongoing basis and we believe there is likely to be an unmet need and, therefore, an opportunity for focused advice models.
“To date, we have seen slow growth and innovation in services that meet these needs.”
FCA data shows consumers with long-term needs were well-provided for, with 94 per cent of advisers offering ongoing advice services, but it wanted to improve options consumers.
Will it work?
Mr Fullerton said the success and viability of a pay as you go, one-off advice service would “completely hinge” on the regulator’s ability and willingness to tackle the problem of consumer redress, ongoing liability and professional indemnity insurance.
He said: “It would be great to have a marketplace where consumers can ask us to give advice on smaller queries while boosting our remuneration, but no one is going to do that if it will cause a big run-off liability.
“It won’t work if in 20 years’ time, someone can turn around and say ‘I changed my Isa because of you and it has not worked out’.”
In terms of PI costs, Mr Fullerton said if a one-off piece of advice were “suddenly classed as full scale advice” in the eyes of insurers then the service would not make financial sense for advisers.