"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."
- Mike Barrett, consulting director at the lang cat
The financial advice gap has widened since the introduction of Consumer Duty, with fewer people paying for and benefiting from financial advice, according to new research by financial consultancy the lang cat.
The survey found that just 9% of people now pay for financial advice, down from 11% in 2023.
Over four fifths (80%) of advisers believe the regulation has made it harder for them to service clients. In particular, this is impacting those with low investable assets and over half (55%) have stopped serving them as a result.
The findings suggest that many advisers have used Consumer Duty as an opportunity to rationalise their client numbers. The requirement to ensure products and services are clearly targeted at consumers for whom they are most suitable for, and ensuring fair value, has created a sharper focus on wealthy consumers approaching and transitioning through retirement.
On the upside, the data shows that of those who pay for advice, 91% find it helpful, with this figure jumping by 14% over the past two years. Over half (56%) said they valued the service and more than a third (37%) said taking the advice gave them peace of mind about having enough money in future.
Cost is the main barrier to people seeking paid advice with one in five (20%) writing off the process as they think it’s 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% said trust, down from 38% last year, which could be as a result of the Consumer Duty regulation.
Mike Barrett, consulting director at the lang cat, said: “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. 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. 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.”
