Provider efforts at plugging the advice gap with more guidance are likely to hit a stumbling block unless there is a culture change, according to guests on the latest FTAdviser Podcast.
On this week's edition Jamie Jenkins, director of policy at Royal London, and Prakash Chandramohan, director of strategy at Tisa, discussed what role providers could play in plugging the advice gap.
They discussed how increased provision of guidance by product providers could give savers the support they needed, but could also hit stumbling blocks.
Jenkins said: "We've got an advice gap, we haven't really made any significant inroads on that in recent years, and we do need to resolve it and it will be a combination of guidance and advice and it will take a lot more than tinkering around the edges.
"We're going to have to get a culture change where people think it is the right thing to do so seek either some sort of guidance or some paid advice at the right points along their lifelong journey and we don't have that culture at the moment.
"We've got fear, misconception, concerns about charges, a lack of understanding of what advisers do and an unwillingness even to take free guidance. That speaks volumes. Why don't we have droves of people going to Pension Wise willingly and saying 'why wouldn't I take this hour-long free guidance session?', and we haven't had that. So there is a cultural issue to help consumers really want to do that rather than feel forced."
Jenkins said many providers, including Royal London, had run experiments offering guidance to savers but said there was a struggle to encourage them to take it up.
Chandramohan said he had listened to consumer focus groups which Tisa had held which showed how little they were engaged with mainstream financial services and were instead turning to "scams, high risk investments and highly volatile investments".
He said: "The traditional industry is not getting through. When we did this research I listened to a lot of the discussions with the consumer focus group and I didn't hear one person talk about the virtues of compound interest or the virtues of a risk targeted, diversified fund. I didn't hear that at all."
Chandramohan said Tisa was working with the Financial Conduct Authority and HM Treasury to address this issue, saying the organisation was lobbying for the creation of a new regulated activity called 'personalised investment communication' to cater for the increasing expectation consumers had for personalisation.
He said: "It would be very similar to the definition of advice except that it would stop short of allowing firms to provide a personalised recommendation but it would allow firms to take personal circumstances into account.
"We don't feel anyone should be able to use this permission. They ought to have to apply for it and go through regulatory scrutiny before they are granted permission.