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MPs warn on advice gap in wake of Budget shake-up

The Budget pension reforms will create a “skills gap” among advisers which will risk consumer detriment as the sector struggles to meet demand, say MPs.

In a Treasury Select Committee hearing on the Budget today, MPs grilled Apfa director general Chris Hannant on whether there are enough advisers to service the growing number of people in need of at retirement advice.

In his Budget speech last month Chancellor George Osborne shocked the industry when he revealed plans to allow savers to take their entire pension pot as cash when they reach age 55. The reform will be introduced in April next year.

The Government is also consulting on proposals to introduce a face-to-face at-retirement guidance service for all DC pension scheme members.

Conservative MP for Braintree Brooks Newmark questioned Hannant over whether there is sufficient capacity in the advice market for the Budget reforms.

Hannant said: “If everyone who is retiring next year was to seek full advice there would be a challenge on capacity.”

He said there is a challenge for the advice sector to become more efficient, and that advice could be delivered more cost effectively through the use of junior staff who are overseen by fully trained advisers.

But Newmark said: “It still seems to me there is going to be a gap in terms of the number of people and the quality of advice that is going to be needed, and which could leave the potential for errors and abuses.

“The market is going to have a problem with mitigating that risk as it evolves to deal with that skills gap.”

Hannant said: “There are advisers who have left the industry as a consequence of the RDR, and I think there is a challenge to potentially bring some of those back. The regulator could do more to lower the cost of regulation to allow advisers to invest in new talent.”

Labour MP for Edmonton Andy Love asked whether lower cost advice channels could help fill the gap between advice and guidance.

Hannant said online solutions may help to bridge that gap, adding: “There is a challenge for our sector to become more efficient and reduce the cost of advice.”

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. What the profession needed was a budget like this, but instead of a trade organisation stating that there is going to be an advice gap problem, maybe it would like to encourage younger people to come into the industry to fill that gap instead of only promoting the vested interests of providers.

    This is a real opportunity for the advice giving profession, not only to repair trust within financial services but for the vast majority of small independent advice practises to grow without the influence of providers.

    So this does seem to be strange comments coming from the head of the APFA unless he is talking about people who don’t hold an SPS.

  2. There is an advice gap caused by RDR. No matter how many young advisers come into the market average man/woman cannot or will not pay for advice upfront. I have clients who state thy would rather go it alone than pay upfront out of earned income when they were able to pay over a term from a provider. Just like hire purchse

  3. Incompetent Regulators 1st April 2014 at 4:58 pm

    Why the existing registered adviser cannot be given the business after the budget announcement is beyond any normal thinking!

  4. Clients are still able to pay for advice over a period of time, it’s called a Fee Agreement. If clients are wanting to go it on their own then that’s up to them, what I object to is clients who use websites online who are a mainly funded by providers with sponsorship arrangements and don’t hold relevant qualifications or authorisation.

    If the FCA wish to get serious about inducements then maybe they should start investigating some of the comparison and guidance websites first, oh I forgot half of them are not registered.

  5. I agree with your comments Peter but where installments are being offered the farcical consumer credit licence issue can raise its head.

  6. Hi Peter – to spread the payments a firm has to have a consumer credit licence as it is providing credit, plus the FCA only like fees spread over a max 2 years I think it is.
    We have two apprentices at present, one doing a level 2 in bus admin and the other a level 3 in Life & pensions. He passed the mortgage qualification last month and I expect he will pass R05 in the next 2 weeks before moving on to R01 and R02. We hope to have him fully qualified to Level 4 within the next 12 months, but it pretty much means solid study with admin and sitting in on as many advice meetings with me and friendly other advisers willing to let him watch them at work in order to see how to use soft skills to back up his theory.
    Bromley college provide training support for CII and IFS exams and there are grants available to take on apprentices which helps defray some of the cost, but it is a significant investment in time and effort taking on apprentices for no financial gain, so it needs to be the right apprentice with an intention to stay and put back in to the business once qualified and competent.

  7. The CCL requirements are one thing but adviser charging rules should be read very carefully. A firm must not use an adviser charge which is structured to be payable by the client over a period of time… 6.1A.22
    It can be done but the rules are quite clear.

  8. I believe this is a prime opportunity for the FCA to do something positive for the financial services industry and promote good sound solid “advice” NOT GUIDANCE LABELED AS ADVICE !!!!

    They need to act swift and clear, all in all, this is / was a good budget (IMHO) both for the consumer and us as a profession.

    If they do promote the value of “advice” and the quality of advice; via those who are regulated with an SPS cert, we may see this whole silly chase around the table with those giving un-regulated advice, end ? the consumer needs to be very clear about the two

    The advice gap will not start shrink until we bring some positives back, this horse as they say is one flog away from death, then you can beat the bugger all day but it wont be getting back up again !!

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