The government, Bank of England and the Financial Conduct Authority (FCA) have long battled with the problem of the financial ‘advice gap’. This is where some people can afford to pay for financial advice, but millions of lower income families cannot afford to get financial advice meaning their wealth, albeit smaller, may not be working as hard for them as it should be.
The Problem for Financial Advisers
Financial services is one of the only industry in the UK that is not subject to Consumer Limitations. There is no 6-year rule and financial advisers have an open ended for life for the financial advice that they give. This means that financial advisers cannot afford to offer lower cost financial advice when the liability is huge and yearly insurance premiums run into the tens of thousands for smaller adviser firms and hundreds if not millions of £ for larger firms.
Many financial advisers and wider public lobby groups have campaigned to have structures in place to enable simplified guidance rather than regulated advice and cut the liability for advisers making it more affordable and accessible for lower income/wealth consumers.
The issue is the boundary between advice and guidance is blurred. It is a grey area and needs to be defined correctly to enable advisers to develop services and breach the advice gap.
The FCA has three proposals that they wil now consult with the industry on:
At this stage, the FCA admits these are very much ‘high level’ proposals, so much more will be needed before advisers can offer cheap low cost advice and when we are then able to launch our ‘robo adviser’ that has been waiting in the wings for a few years now.