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Leader: How do you define the advice gap?

It is something of a truism to say an advice gap was created as a result of the RDR.

There are fewer advisers in the market where those who were close to retirement decided to shut up shop a couple of years early, and consumers are not always prepared to pay upfront for advice.

There is also the increasing demand for advice brought about by the pension freedoms. And none of this is helped by the constant wave of Financial Services Compensation Scheme levies and escalating regulatory costs, which only serve to push advice out of reach for more and more savers.

But is it really as cut and dried as all that? The Financial Advice Market Review call for input does not ask “how do we solve the urgent issue of the advice gap?” but instead questions the causes of the advice gap, and asks for evidence on the scale of the problem. In its response, the Consumer Panel says emphatically it does not believe an advice gap exists.

One of its arguments, quite apart from the lack of supporting evidence, is there is no wailing and hand wringing over those who cannot afford to pay for accountants. In its mind, advice should be treated just the same.

Another argument that runs counter to the advice gap assumption is how can there be an advice gap when there are more advisers to go around than people who want their services?

Against a backdrop of plans to bring back commission and lower advice standards, not to mention a seemingly cosy relationship between the Government, banks and the regulator, you can be forgiven for thinking it is not so much an advice gap as a product sales gap, which providers are keen to fill by touting their wares once more.

As with many questions, the answer lies in how the problem is defined. Is the advice review about getting comprehensive financial planning to the masses? Or is it simply about topping up your pension? If it is the latter, does that really need to be delivered  by an advice service with a  capital A?

One thing is clear – there is a problem with the lack of long-term saving in the UK. If the  FAMR goes some way to addressing this, that is all to the good. If it can make advice more cost-efficient for both adviser and client, all the better.



The big question: Does the advice gap really exist?

Advisers and industry experts have called into question what is thought to be one of the most fundamental negative outcomes to stem from the RDR – the creation of an advice gap. The advice gap, defined as those who cannot or will not pay for full regulated advice, has been widely accepted as an inevitable […]


HSBC to launch mass market investment advice service

HSBC is preparing to launch an investment advice arm later this year for those with less than £50,000 to invest. It comes as Santander announced its return to the investment advice market earlier this month, and as raft of of banks are said to be eyeing the development of robo-advice services. An HSBC spokeswoman says: […]


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 […]

Mick McAteer 06

Mick McAteer: The UK needs a non-profit national advice network

Good financial advice is critical to promoting financial resilience and security amongst households – particularly underserved lower to medium income households which are the focus of our work at the Financial Inclusion Centre. But claims that overregulation has created an ‘advice gap’ are wrong – or disingenuous. The real reasons are growing numbers of consumers […]


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There is one comment at the moment, we would love to hear your opinion too.

  1. I define the advice gap as people cancelling their first appointment once they’re told they’ll be required to pay a fee. It happens less often these days than it used to but it still does.

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