Many people struggle to locate good financial counsel, especially when they are nearing retirement. Even after years of happy contributions to a pension fund, when uncertainty arises about how to turn that amount into income, people often turn to advisors for guidance.
Some look for it sooner when considering a house purchase, starting a family, or receiving a large inheritance. Another explanation is provided by James Rainbow, head of UK investment at Schroders: “Your propensity to take advice goes up enormously when your portfolio exceeds your annual income.”
The Financial Conduct Authority introduced new regulations in July of last year called the Consumer Duty, which aimed to raise the bar for consumers of financial services by mandating better customer service, more transparent communication, and businesses that prioritize the interests of their clients.
However, research published a year later by consultants at The Lang Cat indicates that people seeking financial assistance may be negatively impacted by the new regulations. From 11% in 2023 to 9% this year, fewer people are seeking professional assistance. Many advisors have taken advantage of the new Consumer Duty legislation to cut back on, or rationalize, their clientele.
Four out of five advisers have found it difficult to serve clients due to the introduction of consumer duty, with over half (55%) ceasing to serve those with low investable assets. This has led to regulatory costs for advisers, who have had to absorb the burden. Jamie Jenkins, director of policy at Royal London, suggests that the advice gap may be an unintended consequence.
The truth is that, if you meet the correct “client profile,” most financial advisors will be happy to help you. This has everything to do with how useful you will be to the firm and your ability to pay its fees, rather than your motive for seeking assistance.
Usually, you have to have £100,000 to invest or be quickly approaching that amount of money in order to be eligible. endorsed According to research, putting together a financial plan with £100,000 in investments will set you back £7,597. This is because the average cost of the plan is £2,795 for the first five years, plus a further £4,802 for recurring costs.
Schroders’ research shows that the percentage of experts willing to advise clients with less than £50,000 to invest has decreased from 52% in 2019 to 25% in November 2023. Financial advisers should be wary of those willing to invest with less than £50,000, as they may be “bottom-fishing” or have low-quality advice. Average advice fees are £196 an hour.
The advice industry is facing a crisis due to high demand and supply, with firms struggling to recruit graduates and trainees. A younger, more inclusive generation of independent financial advisers is needed, with nearly half of advisers over 50 and three-quarters planning to retire in the next decade, according to FCA data.
The financial advice industry is experiencing disproportional aging compared to other professions, such as teaching and accounting, where average ages are in the 40s. Technical services director Andrew Tully believes this doesn’t signal a decline but emphasizes the importance of encouraging more people to access advice.
Standard Life’s retirement and savings director, Mike Ambery, suggests pension dashboards and the regulator’s ongoing Advice Guidance Boundary Review could help those who cannot afford or access financial advice. The government project, pension dashboards, is set to go live in April 2025, allowing millions of UK savers to access their pension information at the touch of a button.
The UK financial advice industry could adopt similar solutions as Australia, which has fewer advisers. Australia has implemented “at-retirement advice” through “pot follows member” and the retirement income covenant, while the UK provides a default solution up to retirement, similar to the UK’s “Investment Pathways” introduced in 2021.
Customers should have access to quality, affordable financial advice, but reducing the need for professional advisers at key life stages like retirement may be more advantageous.
