Informed decision-making: an evaluation of the advice gap

Since the publication of the Financial Advice Market Review in March 2016, progress has been slow on a number of its recommendations.

FAMR had the potential to revolutionise the advice market and tackle the advice gap but our research suggests its recommendations are unlikely to make a significant difference to the number of people obtaining advice. There is concern that political attention, including that of the Treasury Select Committee, may move away from the financial advice market as other topics receive increasing consideration.

The Financial Conduct Authority’s (FCA) 2017/18 Business Plan shows advice is still a focus for the FCA, although this attention appears to be increasingly related to the provision of automated advice and on the retirement income decision-making process. Bringing renewed attention to the financial advice market and the advice gap is essential to ensure that the traction FAMR has created is not lost and that the advice gap is reduced.

Policy recommendations:

  • Change the charging structure of advice: consumers should be allowed to choose between paying up front and having the cost of advice spread over the life of the product purchased.
  • The market should look to develop a “personal financial dashboard” that will allow financial advice to be broader and more accessible, and potentially make the benefits of advice more visible.
  • Providers should be encouraged to offer more financial advice that relates less to product-based decisions and more about “whole of life” financial planning. The demonstrable added value from this form of advice could help to narrow the gap between the price consumers are willing to pay and the price being charged.
  • The FCA and HMT should regularly engage with providers of advice throughout the FAMR implementation process, this should include a variety of advisers from firms of different sizes and with differing propositions. This will ensure that the advice gap is tackled effectively and that providers of advice are promoted to openly discuss the challenges they face in helping to reduce the gap so to ensure that the momentum for change is not lost.

Download The Report: PDF