Is there an advice gap? Yes, no and maybe are the rather mixed messages we have been getting recently from the Financial Conduct Authority.
FCA director of supervision Clive Adamson said last week that it was not clear whether an advice gap exists and that auto-enrolment could get people to save without advice.
In contrast, FCA chief executive Martin Wheatley recently told MPs he was concerned about a post-RDR advice gap, with a drop in advice availability for lower-value clients.
FCA chairman John Griffith-Jones says the regulator is “alert to the advice gap issue” and called on the industry to suggest solutions.
There was a marked 15 per cent fall in IFA numbers between December 2011 and this summer, with bank adviser numbers down by nearly half.
You can question the quality of advice that many bank clients were receiving but overall, fewer people are getting access to regulated investment advice, fewer people will therefore be able to complain to the Financial Ombudsman Service and fewer people are being sold important related products such as protection.
Auto-enrolment should ensure that more people save for their retirement but it is not a replacement for financial advice across a range of client needs.
The FCA talks vaguely about “cost-effective advisory models” and “web-based, entrepreneurial models” but firms have been reluctant to get involved without assurances over the cost of regulations overseeing any simplified regime.
Recent Aviva research suggests that nearly half of advisers still provide advice to clients with less than £50,000 to invest, although there are questions over sustainability as 22 per cent say they service such clients at a loss.
This shows a hunger among advisers to work with this area of the market. Apfa is in talks with the FCA about reducing the costs and bureaucracy surrounding the running of an adviser business. This has surely got to be the simplest way to start addressing the gap.
In this issue, we hear from a number of networks which are proposing mass market advice solutions.
Similar ideas have been rejected by the regulator in the past, although perhaps when it was in less of a “listening mode”. They also came from a banking sector which the regulator did not trust, with good reason as it was investigating many of them for various misselling problems.
Listening to advisers and supporting their ideas seems the natural place to start in addressing any advice gap.