Citizens Advice recently published a report claiming almost half the UK’s adult population – 23 million people – would have taken financial advice at key moments of their life had it been on offer.
It found a third would take advice on starting work or changing jobs, a quarter when buying a home and 37 per cent when going through a divorce or separation. Three million would have taken free advice in the last two years had they known where to find it and 5.4 million would supposedly consider paying for it were it cheaper.
So what? Most people will take anything if it is free, whether they need it or not. Being free only guarantees it will be less valued than it might otherwise have been had it been paid for.
To meaningfully quantify the advice gap we need to identify who falls into it and why. I would say there are four distinct groups but in reality only one of those are truly gap-ites.
The first consists of those who will never be helped because they are lazy and feckless. Sensible advice for them boils down to “stop spending your money on Special Brew, takeaways, fags and Sky TV and start buying food down the market and preparing it yourself”. They will ignore it, however, because it is not how they want to live. They are not victims of the advice gap.
Then there are those who can afford to pay for advice but just do not want to. This is the constituency to which the Daily Mail panders: Victor Meldrews who have the Financial Ombudsman Service on speed-dial. They will grab with both hands anything free. But they are only part of the gap because they choose not to pay for advice. Should we be subsidising them? I think not.
Third come the poor but responsible. With them I sympathise. They manage their money as best they can but just do not have enough. Spending less is not a realistic option. The cost of housing and travel to work is a significant proportion of their budget. They have nothing left to save or invest. Some in our industry deny they exist. They do: some are my friends and neighbours. They are not, however, part of the advice gap because advice will not become relevant to them until they have surplus income and capital to require it.
Only when they rise into group four will they become the true victims of the advice gap. Perhaps they will want advice on putting away £100 per month. In the days when an adviser could earn £500 upfront for setting up some sort of regular savings plan they were perhaps just worth advising. Now they are not.
Time was when we turned nobody away. Sadly we are now often forced to. If the regulator really wants to fill the advice gap, then it should permit a limited reintroduction of commission.
If it is not prepared to do that it should stop expecting advisers to solve its failure embodied in the RDR that created it in the first place.
Neil Liversidge is managing director of West Riding Personal Financial Solutions