The Financial Advice Market Review is a big opportunity to get the right framework to enable people to get the financial help they need. We have met with the review team, the responsible minister and FCA acting chief executive Tracey McDermott to discuss what needs to change.
We have debated with members whether it is a demand or a supply issue. The answer depends on who you are talking about.
Research from Citizens Advice recognises three potential types of advice gap. The first is the 5.4 million people wanting advice but unwilling to pay the prevailing market rate; then there are the 14.5 million people who want advice but cannot afford to pay for it; and finally there are the 10 million who are unaware advice exists, or where to get it. This highlights the fact there is no single solution to ensuring affordable help for all.
Many in the mass-market space (which will tend to coincide with the latter two groups) have limited or no savings. They need advice on issues such as debt, mortgages, insurance and protection. They are not typical financial advice clients.
These people need help that would not necessarily be regulated: to manage debts, increase saving and ensure some protection against financial shocks. This is what the Money Advice Service was set up to do. In part, the challenge is connecting these people with the support that already exists – but there may be alternatives (such as through the workplace) that could also help.
Where there are willing customers and potential supply, there should be remedies to address the market failure. There is scope to reduce costs but not standards and get the market operating more efficiently. We have submitted an initial response to the review and are considering further steps that could help.
If the regulatory cost of delivering advice were reduced, more people would be able to access it at a price they are willing to pay. Citizens Advice identifies 5.4 million people in this group – enabling just half of them to access an adviser would be a huge step forward.
Chris Hannant is director general at Apfa