The UK Government has been urged to close an ‘advice gap’ which has opened up in its’ financial advice sector after recent changes led to less advisers having to charge more for financial advice.
As part of these moves the UK Government has been asked to consider narrowing the definition of regulated advice so that it is based on a personal recommendation and allowing advice firms to offer general advice, labelled financial guidance in the UK, at a lower cost.
The moves are part of recommendations recently made by the Financial Advice Market Review (FAMR), which was conducted by the UK Treasury – HM Treasury and financial advice regulator – the Financial Conduct Authority.
The review follows the implementation of a Future of Financial Advice style regime in the UK – the Retail Distribution Review (RDR) – which raised the standards of professionalism for financial advisers and removed commissions on investment related products and advice.
However, the FAMR said while the RDR had been useful it had priced advice out of reach of many consumers who did not want full scale advice or could not pay for it if they did require it.
“Following the RDR, the UK has a high-quality financial advice market. Standards and professionalism in the industry have increased. That drive to higher standards, along with other factors discussed in this report, has, however, contributed to a reduction in adviser numbers,” the FAMR report stated.
“the UK has a high-quality financial advice market…That drive to higher standards…has, however, contributed to a reduction in adviser numbers”
“The move to fee-based advice on retail investment products has improved transparency and ended conflicts of interest caused by a mainly commission-driven model. However, advice is expensive and is not always cost-effective for consumers, particularly those seeking help in relation to smaller amounts of money or with simpler needs,” the report added.
The FAMR said the development of an advice gap was defined as situation in which consumers were unable to get advice and guidance on a need at a price they were willing to pay, with the gap caused by the present high cost of advice, particularly where a consumer only had small amounts available to invest, lack of consumer confidence in engaging with financial issues, and a lack of trust following past instances of mis-selling.
“The market currently delivers high-quality solutions to those who can afford advice. However, not everyone wants or needs a personal recommendation in respect of every decision, nor do they always need a comprehensive assessment of all of their financial circumstances and requirements,” the FAMR report stated.
As a result of this the review called for greater regulatory guidance around what was regulated, or personal advice and more general forms of help to allow advice firms to develop services that met simple consumer needs.
The review also recommended that the UK Government should consider providing pre-retirement access to small sums of a consumer’s pension to pay for pre-retirement advice and to make advice more accessible stating consumer would have access to advice at a key milestone in their lives and feel confident in making financial decisions as they approach retirement.
Really ??? I remember this all being discussed 2 years ago ! No one wanted to listen then ! Why should they now ?
Exactly what the problem will be here with both investments and risk products. If you can afford advice you’re okay. If you can’t afford advice, you are probably the one who needs it most. Maybe if the adviser was paid a decent commission instead of charging the client, more people could afford proper advice.
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