There has to be a credible alternative to advice in order to help solve the advice gap, according to Ken Davy, founder of SimplyBiz.
Speaking to FT Adviser, Davy said a huge advice gap remains in the industry but there is not an obvious solution to this problem
“If we continue to refer to the problems facing consumers in terms of an ‘advice gap’, we perpetually run around a maze with no exit," he said.
“There has to be a credible alternative to advice.
"There must be a solution whereby consumers are provided with information and education, and they can choose products for themselves in a clear and fair marketplace – but with responsibility for the outcome of their decisions.”
When considering what is most valued by consumers who take advice, it is the personal interaction and the transfer of risk, Davy explained.
He argued there are not enough human professionals to help everybody with every decision they need to make.
“There is a huge role for the workplace in meeting the demand for safe spaces where consumers can take, and be responsible for, their own financial decisions,” he said.
“Presently, the regulator risks pursuing an obsession with ‘the perfect as the enemy of the good’; constantly placing professional financial advice under the microscope.
“Professional financial advice is doing its job for the people that can get the most value from it.”
Pressures ahead
When looking at 2024 and imagining the focus for the firm, Davy said he was reminded of a paper recently published by AKG on the Future of Advice.
The research concluded that the backdrop of pressures and uncertainty are inescapable for most clients and their families, and that the economics of professional financial advice will make it difficult for it to be available to everyone.
“Professional financial advice has been, and remains, the gold standard for quality and outcomes for consumers,” he said.
“This is because it is driven by professional experience and a true sense of duty to the client and their lifetime objectives.
“It should never be watered down, or in any way described in the same terms as other, lesser, services for clients to access financial products.”
Davy said firms should instead commit, as an industry, to signpost professional advice clearly for all.
“We need to make sure consumers can understand it, can see the value of it, and then work out if it is likely to be of value to them, at this point in their life and circumstances,” he said.
“Technology will play an enormous part in helping more clients access the huge benefits of professional financial advice.”
Davy said there needs to be a fair marketplace for consumers to engage, understand their needs and provide them with information so they can take responsibility for the choices they make.
“This is our big challenge, and in 2024 we must make some meaningful headway on transforming the retail financial services market, for the sake of the UK economy and overall societal wellbeing,” he added.
Consumer duty
Over the past year, advisers have “dealt admirably” with the implementation of consumer duty, the appointed representatives regime, and increased RegData reporting, Davy explained.
Advisers will now turn their attention to the retirement income advice review, later life lending review, and the Dear CEO letter on the Financial Conduct Authority’s expectations for wealth managers and DFMs.
“The reason so much has been achieved in a single year is because the great majority of advisers have been building better businesses,” Davy said.
“They have been building businesses with clear propositions, clear target markets and services.
“The successful businesses have embraced technology on a massive scale from where things were a few years ago.”
Davy explained that firms have shown “agility and ability to read the lie of the land” and adjust to change with speed and conviction.
The result is that, despite all of that change and challenge surrounding them, growth is now at the top of the agenda for a majority of advice firms.
He said while 70 per cent of professional firms who responded to the firm’s 2023 adviser survey said they found adopting new regulations to be one of the biggest challenges in their business, nearly as many (65 per cent) now said growth is their key objective for the year ahead.
On the downside, he explained there have been fairly static numbers in the profession, and more needs to be done to attract talent and retain experience.
“It is a return of the desire to grow their businesses that will ultimately see them taking on more clients, hire and train more paraplanners and advisers, and be the driver for expansion,” he said.
“We must all do everything we can to enable this to happen.”
sonia.rach@ft.com
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