Just 7 per cent of advisers currently have plans to offer core advice for Isa customers, with the majority of advisers still citing issues such as capacity, fees and the risk associated with potential liabilities that come with such advice.
That’s according to a survey by AJ Bell, which gathered responses from 146 advisers using its platform earlier this month.
The survey also found 41 per cent said they would not provide core advice, while 52 per cent were undecided.
The main reasons given by firms who said they would not offer core advice included being focused on servicing wealthier clients (31 per cent), that advice fees for such a service would be too low (24 per cent), that they already have enough clients (19 per cent) and concerns over potential liabilities (17 per cent).
Tom Selby, head of retirement policy at AJ Bell, said he worries the regulator’s ‘core advice’ reform proposals could, at worst, see firms “effectively encouraged to flog products” rather than focus on providing ongoing advice.
We could see a return to a product-sales focused environment, which in turn increases the risk of misselling.Tom Selby, AJ Bell
“It is also far from clear [that] advisers have the appetite to develop propositions that could sit within this proposed regime,” Selby continued.
The Financial Conduct Authority’s consultation closed on core advice yesterday (February 28).
The proposals include reducing qualification requirements for those providing core advice, as well as requiring a more straightforward ‘fact find’ and a shorter list of funds to pick from.
Selby said he does not believe these changes will result in sufficiently lower advice costs to make serving those with Isa funds worth £20,000 or less attractive to the advice community.
Orphan clients and sales-focused model
In its consultation response to the FCA, AJ Bell raised a number of concerns it has around the City watchdog’s core advice proposals.
These included “the likelihood” that the transactional nature of core advice may lead to large numbers of orphan clients, that consumers may struggle to differentiate ‘core’ and ‘holistic’ advice leading them to misunderstand the support they need, and that “the narrow scope” of core advice lends itself to a “sales-focussed bancassurance model”.
A solution, AJ Bell said, would be for the FCA to clearly outline its plans for the review of the advice/guidance boundary, and focus on addressing factors which unnecessarily increase the regulatory burden on advisers, raising the cost of giving advice and preventing it being accessed by more people.
