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Consumer Panel questions existence of advice gap


The Financial Services Consumer Panel has questioned whether an advice gap exists in its response to the Financial Advice Market Review.

The Consumer Panel says it has seen no evidence of a gap in the supply of professional advice, apart from where savers wanting to transfer from a defined benefit scheme are forced to take advice.

Consumer Panel chair Sue Lewis says: “Consumers do not always seek professional advice, even when they could benefit from it: some are not aware of what is available; they do not want to pay for advice because they do not understand the price or value of it; they cannot afford it; or they prefer to take decisions themselves.

“The industry needs to be more transparent. People want to know exactly what they are paying for and what they are getting for it.”

In particular, the Consumer Panel’s response cites 2015 research from Which? which found that 70 per cent of firms do not list pricings online.

It says: “The industry has also done little to dispel the myth that, prior to the RDR, investment advice was free. It is perhaps not surprising, then, that consumers are reluctant to pay for something that they believe used to be free.

“We would emphasise that financial advice is the same as many other professional services. People pay for professional services in other areas, such as for accountancy advice. Some people can afford this, others can’t.

“Yet the Government does not generate a debate about whether there is, for example, an accountancy ‘advice gap’ that must somehow be filled. Services are accessible to those who need them at the market price.”

Similarly, the Panel also questions the role of future liabilities in the cost of regulated advice, noting that it had also seen no evidence of it causing long-term difficulties for most firms.

It says the Government should tackle the cost of professional indemnity insurance, rather than introduce a long-stop for liabilities.



ABI: We cannot miss this opportunity to close the protection gap

The Government’s Financial Advice Market Review is looking at all aspects of financial advice to identify gaps before setting out recommendations by Budget 2016. While the review focuses on investments, savings and retirement products, other areas should also be considered as part of its scope: in particular, protection, given the low levels of cover for […]


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There are 17 comments at the moment, we would love to hear your opinion too.

  1. Presumably they are members of the flat ear society as well.

    Perhaps, more likely, they are pursuing the regulator-led example of searching for evidence to back up they theories rather than the time-honoured method of fitting theory around reality.

  2. earth……not ear

  3. So, “Similarly, the Panel also questions the role of future liabilities in the cost of regulated advice, noting that it had also seen no evidence of it causing long-term difficulties for most firms.”

    How on earth can “long-term difficulties” be assessed when RDR has only been in play for two years? Did they seek detailed projections from firms on the basis of lower revenue streams due to lost clients + lower potential income from a fee structure?

    To say “We would emphasise that financial advice is the same as many other professional services. People pay for professional services in other areas, such as for accountancy advice. Some people can afford this, others can’t” is pure flippancy. There is a real need for consumers to fear the effect of poorly prepared HMRC returns, hence the sense in paying fees to an accountant! The same can’t and won’t ever apply to seeking sound financial advice, so it will always be considered ‘a risk worth taking to avoid fees’!

  4. This from the Consumer Panel?! I despair.

    Post RDR, the number of UK citizens using professional financial advice has been estimated to have fallen by amounts in the range 23% to 30%. That’s a measure of the advice gap (it’s increase)…not the market’s ability to service people actually able and willing to engage with it on the current market basis and rates.

    The accountancy parallel is disingenuous. Few people are harmed by not seeking out accountancy services compared to the many people who are harmed by not having the pensions, savings and protection needs on the best footing they can be. And we know more than ever that swathes of the population are falling into this category.

    And as for “the government should tackle the cost of PI”…how else can that be tackled than by reducing the risk?

    • Compliance Thought 20th January 2016 at 1:37 pm

      What survey shows it has fallen 23% to 30%

      • The report commissioned by the FCA (Europe Economics “RDR Post Implementation Review” (2014)) quotes figures on UK advice uptake, with Fundscape “Navigating in the post- RDR landscape in the UK” (2014) as the source – I haven’t looked into their methodology.

  5. Ah ha – another committee of experts

  6. My goodness – would you believe! Sense from the Consumer Panel. This must be a first. I have been saying the same for years. There is no gap. Those who don’t seek advice either don’t want it, would be better off paying down debt, or just don’t have the wherewithal to engage.

    Those that continually bleat about this chimera are either absolutely desperate for business or believe they are social workers, not businessmen/women. (have to be PC nowadays!)

  7. I welcome the Financial Services Consumer Panel comments that there is no evidence of an advice gap. The so called advice gap is being used to support the proposal to step backwards and return to commission and this is not the way forward. As stated we do not see Government or Regulatory intervention for any other so called gap such as accountancy and legal. If given time the current system will prove the value of advice, all being that some consumers will find themselves out of pocket due to no advice and poor outcomes.

    The RDR was pushed through against many objections, as it was seen as a way to educate the consumer that advice was being paid for and the value it offered. The problem with the pension freedoms is that an adviser is being asked to sign for the future liability of the consumer taking their funds, effectively giving the product provider, FCA and Government an escape goat.

    If you have savings you can afford advice. Increase the threshold at which an advisers sign off is required. Provide set rules and disclaimers for smaller investment values below this threshold, which if followed would allow advisers to offer simple advice if sort at the lower end with certainty at a reduced cost.

    This is not hard to understand. Commission is a return to the days when advice was seen as free, commissions hidden away at the back of any illustration, one hundred percent allocation, with hidden charges hiding the truth.

  8. This is the most depressing thing I have ever read – and I studied The Bell Jar at university.

  9. So, the fscp question the existence of the advice gap……….. However Elvis does work in a Scunthorpe fish and chip shop !

    Do any of these nincompoops have any credibility ?

  10. Commission is not a blunt tool. It rewards advisers for prospecting.

    I would not expect the quango-sitters to understand what this means. They can barely understand how retail financial services works without adding the weight of prospecting for new clients.

    How are these buffoons chosen for these committees? Is there some entrance exam where a failure to understand guarantees a place?

  11. A new client came to see me the other day. Needs help completing the paperwork to vest his occupational (defined) benefits and advice on how best to apply his AVC fund. He’s a bit dyslexic, has a variety of health issues, including osteo-arthritis which makes writing very difficult, and his net worth is -£410, so he can’t afford any level of fee.

    I think I’ll refer him to someone like Harry Katz.

  12. There is an advice gap – If the consumer panel deny this one of us is wrong

    Perhaps we are both right but referring to different things

    By the advice gap I mean that there are lots of people who find it too difficult to make the right decisions without advice but for a number of reasons they don’t have access to the right type of advice

    The result is poor outcomes.

  13. There is no advice gap.

  14. Funny about all this traparency stuff coming on the very day OFFCOM has told broadband companies to make everything simpler for users by having one figure that the user will pay. Their research shows that people are put off and confused by having the total cost “itemised”. Is bb is £x pm, phone package is £y pm and line rental is £z pm. People are only interested in the total. Not the detail. For the panal to say they have found no evidence, only tells me they have not looked properly.
    Laws of economics is very simple. We need a minimum amount of income for every single sale/product recommendation/piece of regulated advice (call it what you will) to be profitable. This is higher now than ever so obviously there are fewer people that can/will want to pay that figure. It is not rocket science and so even this panel of “experts” should be able to grasp that.
    Still they need the odd press release to let us know they are still here.

  15. For once, I agree with the Consumer Panel. What I would say, however, is that the cost of delivering advice could be less, and therefore more accessible to more people. Hopefully the FAMR will help with this (although I’m not holding my breath).

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