The Financial Advice Market Review, the joint Treasury and Financial Conduct Authority (FCA) investigation, has seen the industry support the goal of closing the advice gap, making affordable advice accessible for all. As more and more small businesses look to provide support to employees struggling to manage their retirement savings, this review could not have come at a better time.
The review analyses the efficacy of the current regulatory and legal framework governing financial advice and guidance provided to consumers. This means evaluating whether consumers have the correct access to information, advice and guidance that will empower them to make informed decisions about their financial future.
Following the review, the report has set out 28 policy recommendations which are intended to support people in making better decisions at retirement. These recommendations are likely to bring radical changes to the industry, as they aim to give more people access to advice. Businesses, in particular, could benefit as existing provisions for workplace advice are enhanced (as policymakers look to improve support for savers following the recent pensions freedom reforms).
However, there are some financial advisers in the industry that are sceptical about the FAMR, claiming that it will have little impact in making financial advice available to the mass market. Others are simply not prepared to adapt their business models. According to research by Intelliflo, 24 per cent of advisers have stated there is nothing the government or regulator can do to encourage them to work with clients who have under £30,000 to invest.
Zurich research found that advisers do not seem to believe advice will be made more widely available to the mass market in the coming years. About half of those surveyed said they expect the number of consumers accessing advice will increase by 4 per cent or less in future. That said, the study found many advisers do want to see the industry restructured to better address the advice gap; 23 per cent want a remuneration structure which will help them cater for the mass market, 21 per cent want to see firms provide simplified advice for existing clients, and a quarter of those questioned want the consultation to suggest alternative affordable advice models.
In September, MP Harriett Baldwin told the FCA the government was keen to explore opportunities for advisers in the Fintech sector, such as automated advice, saying it was keen to bring advice to the mass market in simpler and cheaper ways.
This willingness to embrace technology, and introduce simplified advice services, or robo-advisers, will go a long way to help provide cost-effective guidance to consumers looking to make decisions about their finances. They can be employed by advisers (helping them to service ‘lower value’ clients), or indeed by businesses (large and small) looking to provide workplace support to employees managing their pensions.
Working side by side with businesses, robo-advisers plug the advice gap by offering affordable advice to employees via online apps. Some, for example, can generate a personalised advice report in around ten minutes via an online app, which is supported by leading financial experts. This new generation of accessible advice provides many more people with professional guidance on their pension investments, and addresses some of the issues the FAMR report identified. Plugging the advice gap for those who do not have significant wealth; the barriers small businesses may face in giving advice; how firms could get clarity to innovate and grow; the opportunities presented by technology to provide cost effective advisory services; and how best to encourage consumer demand for advice.
Making affordable advice more accessible is at the core of the initiative. If this is addressed and proposed measures implemented effectively, it can only be a positive step towards helping small businesses guide their employees into a healthier financial future.
Andrew Firth is chief executive of Wealth Wizards.