Consumer Panel questions existence of advice gap

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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.