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Nic Cicutti: The advice gap has always been there


When I started writing for Money Marketing many years ago, our highly enlightened editor at the time believed passionately in the need for all his journalists to go out and meet as many IFAs as possible.

So it was that for the 18 months I worked on the paper as a full-time writer, I travelled thousands of miles and met, literally, many many hundreds of financial advisers. Quite a few are still my friends today.

One in particular, who told me the story of his “success”, struck me as emblematic for the IFA industry as a whole. He started out in the early 1980s by knocking on every single door in his area. More often than not, people slammed the door in his face. But over the years, this IFA ended up with scores and eventually hundreds of clients who became the backbone of his burgeoning business.

Even then, more than 10 years after he started out, he confessed that many of his early clients were hardly “worth” seeing on a regular basis. The volume of business they brought in relative to the amount of time they took up simply didn’t stack up financially. As often as not they’d call him about an issue and he’d do his best to offer advice, without earning a penny from them.

Yet he remained doggedly loyal to his clients: “Without them at the beginning I’d be nowhere now. Besides, where else could they go for help?”, he told me simply.

There’s no doubt in my mind every reader of this column has at least one “client” like that, or quite a few in some cases, someone they started out with and whom they continue to help virtually for free.

Apart from anything else, in much the same way as Roman generals used to have a slave whispering: “Remember you are a mortal,” in their ear during triumphal parades, these former clients are a reminder of when they began scratching out a living from financial advice all that time ago.

I was reminded of this story by a column from Neil Liversidge in last week’s Money Marketing. Neil writes about meeting up with a few “industry luminaries” to discuss issues facing the profession. “One was the advice gap, something that has become increasingly obvious, greatly exacerbated by the RDR.” Apparently, my heart would have “warmed” to learn of such a conversation.

At the end of this anguished discussion Neil’s conclusion was simple: “I suggested we just drop Dave Cameron and Martin Wheatley a line pointing out that the gap exists, admitting we cannot fix it and inviting them to try.” Very heart-warming indeed.

Ironically, knowing that deep down Neil is a big-hearted softie, I suspect he doesn’t really mean it. I bet that Neil, like lots of IFAs, will always have a list of clients he will never get rid of, now matter how little they add to his bottom line.

My real issue is with this “advice gap” that everyone talks about. I mean, how big is it really? My gut instinct is that this “gap” has always been with us. Eleven years ago, for example, the ABI was talking about a £27bn “savings gap” with regard to people’s retirement plans.

Or looking at protection, the central need for most working families, back in 2005 Defaqto reported that less than 150,000 income replacement policies were sold and just 600,000 critical-illness policies, half their high-point a few years previously.

In 2009, when the RDR was barely a glimmer on the horizon, Defaqto found that 45 per cent of the population had not bought any type of protection cover, even of the most basic sort.

Some 72 per cent were saving less than £100 per month and 35 per cent were saving nothing at all. Significantly, only a third of people had their mortgages covered in the event of anything happening to them.

In 2010, the ABI reported that £1.9bn was paid out to more than 40,000 families and individuals through critical illness and life insurance policies. More recent figures suggest that some 56,000 claims were made and 53,000 people received payouts.

In April this year, the ABU reported that in 2011 some £6.7m a day was paid out to claimants. This was up on £5.9m a day a few years earlier but only because of the introduction of proportionate settlement, less fishing expeditions at the point of claiming and better underwriting.

Yes, that’s £2.5bn that helps many thousands of people each year. But let’s not kid ourselves that the total paid out annually covers anything other than a miniscule minority of people who should have taken out protection yet failed to do so.

In other words, the “gap” everyone talks about as if it were a looming phenomenon has been with us for more years than anyone cares to remember. IFAs, meanwhile, have been pruning their client lists for years, as a cursory search through Money Marketing online, not to mention my own conversations with advisers bears out amply.

Yes, there is an advice gap. There always has been. The task for advisers, as ever, is to find profitable ways of reaching as many clients as possible – without romanticising the past or blaming regulatory changes for something that has always been there.

Nic Cicutti can be contacted at



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There are 14 comments at the moment, we would love to hear your opinion too.

  1. RegulatorSaurusRex 25th July 2013 at 9:01 am

    Like the gap between a balding man’s forehead and his hairline the advice gap has been gradually increasing, that is the regulatory effect.

  2. who cares?
    Not the government, not the regulator, not me.

  3. Advice is given, but not always taken. How many of those people without cover have seen an adviser of some sort and not taken up the advice?

    As for caring, I’m guessing that above thinks that clients are just pound signs, does he work for the regulator? 😛

  4. Like the claim that young children 40 years ago read books all day.

  5. Do journalists care if people cannot read?
    To the point where they give of their time & money to rectify the situation?

  6. Ask any business about their gap.
    Solicitors will tell you there is a gap for people who should have legal advice, an accountant will tell you there is a gap for people who should have tax advice. A car salesman will tell you there is a gap of people who should have a new car.
    Common theme? most of those in the gap cannot afford to get out.

  7. Then there’s the widow whose husband didn’t see the need for insurance. He worked on the oil rigs off the coast at Aberdeen and drove thousands of miles each year to and from work. The adviser (me) demonstrated the gap in his thinking and just about forced him to think otherwise. (It was called good salesmanship in those days) Long story short he was killed driving to work and whilst the cover he had did him no good it certainly did his family a power of good. These people have been abandoned by just about everybody from the life companies to the FCA and everything in-between. Was this the type of thing the press wanted to write about? Though not.

  8. Bull’s Eye, Nic!

  9. not so much a gap, more a chasm

  10. The one thing I have found is -:

    People would rather pay £50/ £100 off a month on their credit card than save !!!!

    Screw the savings, screw the pensions, I started off with nothing and I have still got most of it left !!!!

  11. Full marks James. You sold him the policy. You convinced him that it was worth forgoing something else in order to put the cover in place. Therein lies the nub of the gist: if you sell any kind of insurance that isn’t compulsory, or any kind of savings vehicle, you have to persuade someone to have a cheaper holiday, or postpone the purchase of a new lawnmower or whatever. You’re competing for the discretionary spend dollar.

    There is no ‘advice gap’. There just aren’t enough people out there selling.

    No-one wants to go back to front end loads and crafty allocation rates. But the products themselves should be regulated and properly qualified people should be allowed to get out and sell them, subject of course to suitability criteria.

  12. I have to disagree a little here.

    I started in the industry in 1995 working as an agent for Britannic. We sold IB policies and collected the premiums regularly.

    I also started pensions for many of my customers.

    I am willing to bet that very few of those people have changed or kept up with their regular savings since the IB part of the industry went sount in about 2000.

    No the products weren’t great, had high charges and were ‘sold’.

    The main point was they were sold and many people benefited from them.

    A Gap has always been there – it’s just getting bigger and bigger.

  13. Julian Stevens 29th July 2013 at 9:31 am

    You’re overlooking, Nic, the fact that that nowadays the FactFinding process takes twice as long as it used to, the research on which to base one’s recommendations takes much longer and writing it all up takes about four times as long.

    Then there’s all the additional paperwork, higher costs to mail it all out to the client, higher PII costs, higher regulatory levies, more time that has to be spent on all sorts of additional compliance procedures. Gas, electricity and petrol/diesel prices are forever going up.

    The only source of the money to meet all these additional and endlessly rising costs are clients. Our businesses aren’t funded by charitable donations or by local or central government grants. If our businesses don’t make a profit from our clients then they go under, simple as that. To all these considerations, the regulator, with its open mandate to impose whatever levies and additional compliance burdens it thinks fit, remains resolutely oblivious.

    So we have to charge more just to stand still and we cannot take on clients who cannot or will not pay those extra charges. Clients who cost us money to retain and service simply have to be discarded. How can the availability of advice possibly do anything but decline?

    These are simple business economics, Nic, and if you cannot comprehend them then you’ve obviously been on a salary for rather too long.

  14. Or looking at protection, the central need for most working families, back in 2005 Defaqto reported that less than 150,000 income replacement policies were sold and just 600,000 critical-illness policies, half their high-point a few years previously.
    The whole point we make about modern regulation is that it has been responsible for the savings/pension/protection gap increasing and the RDR will exacerbate this. Before modern regulation it was possible to deal with at least two clients per hour ethically but without the reams and reams of paper required. Now it can take a day or more for one client.

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