Just nine per cent of people now pay for financial advice, a reduction from 11 per cent in 2023, according to a new study from financial consultancy the lang cat.
As the number of people paying for and benefiting from financial advice lessens over time, the lang cat has questioned the success of the FCA’s Consumer Duty regulation, which was introduced to provide better outcomes for consumers.
The new ‘Advice Gap’ study features YouGov research of over 2,000 British adults, alongside fieldwork by the lang cat involving over 200 financial advisers. It found that, instead of Consumer Duty improving access to suitable products and services, 80 per cent of advisers believe the regulation has made it harder for them to service clients.
In particular, this trend is impacting those with low investable assets and over half (55 per cent) have stopped serving them as a result. It appears that many advisers have used Consumer Duty as an opportunity to sharpen their focus on wealthy consumers approaching and transitioning through retirement.
Consumer Duty’s requirement to ensure products and services are clearly targeted at consumers for whom they are most suitable seems to have been the driving force behind this.
Mike Barrett, consulting director at the lang cat
Mike Barrett, consulting director at the lang cat, commented: “Consumer Duty has triggered a major overhaul of the advice sector. The requirement to have a clearly defined target market, and represent fair value, has naturally resulted in advisers ensuring they offer their services to those with the most assets and complex needs.
“This is not a criticism of the profession – in fact, it makes complete sense. Advisers run businesses; they are not paid to deliver social policy. However, change is required to ensure more consumers can access financial advice and support when needed.”
Work to be done as advice gap widens
Cost is the main barrier to people seeking paid advice with 20 per cent writing off the process as they think it is too expensive. This has replaced trust in the profession as the main deterrent. When customers were asked which if anything would need to change for them to pay for financial advice, 31 per cent said trust, down from 38 per cent last year, which could be a result of the Consumer Duty regulation.
“Our research shows that the FCA’s work on the Advice Guidance Boundary review is broadly supported by the advice sector, albeit the majority of firms will not develop new services alongside their existing ‘full advice’ offerings,” added Barrett. “Whoever forms the next Government must ensure the FCA accelerates this work from consultation to final policy. This means consumers who are unable to access traditional advice, can get some help with their increasingly complex financial lives.”
On the upside, the data shows that of those who pay for advice, 91 per cent find it helpful, with this figure jumping by 14 per cent over the past two years. Fifty-six per cent said they valued the service and more than a third (37 per cent) said taking the advice gave them peace of mind about having enough money in future.
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