The FCA and government are undertaking a review of the regulatory boundary between financial advice and financial guidance, known as the Advice Guidance Boundary Review, to create a framework that ensures consumers get the help they want, at a cost that is affordable. As part of the review, they have just published a policy paper with proposals for closing the advice gap.

"We fully support the need to bridge the advice gap; a challenge that demands regulatory change,” James Heal, director public policy at St James's Place, said in a statement. “As a firm committed to helping clients plan and manage their financial futures, we believe this initiative is vital for the overall financial wellbeing of UK consumers who do not currently receive advice." 

The challenge of an "advice gap" has bedevilled the UK financial sector and policymaker for more than two decades. More than 10 years ago, when the Retail Distribution Review package of reforms was introduced, a number of independent financial advisors quit the sector, merged or sold up, adding to concerns that reforms, however well-meaning, had widened such a gap. At a time when UK citizens are being urged to save more for retirement amidst an ageing population profile, the "gap" in advice for many citizens remains a concern.

Supply solution
SJP thinks increasing the supply of advice is a key part of closing the advice gap. There are significant challenges posed by factors such as an ageing population of advisors and perceptions that may deter individuals from seeking advice due to perceived complexity or insufficient funds. SJP said it is contributing to addressing this through its Academy.

SJP also thinks that financial education should be part of the long-term solution and encourages collaboration with the Department for Education to explore curriculum changes that can enhance financial literacy.

The proposal has also been welcomed by the ABI. “Navigating the financial world can be confusing and many consumers aren’t receiving enough support which can negatively impact their financial resilience and living standards, especially in retirement,” George Ritchie, senior policy advisor for long-term savings at the ABI, said.

“The government and FCA’s proposals of targeted support and simplified advice to close the advice gap are extremely welcome. Targeted support would allow firms to use limited information about a customer to make suggestions appropriate for ‘people like them’. A simplified advice regime would enable firms to deliver advice using only information relevant to a specific consumer need. If they include certain key features, these proposals would enable firms to provide tailored, affordable support to help consumers through various stages of their saving, investment, and retirement journeys,” Ritchie added.

In particular, SJP said it fully supports the proposal to clarify the boundary between advice and guidance but needs examples of what support can be provided to consumers without it falling under regulated advice. 

Targeted support also presents a great opportunity to help consumers make more informed financial decisions, SJP added. But the wealth manager believes that targeted support should not look or feel like advice to the consumer to avoid consumer confusion and detriment. “There is sufficient scope to offer consumers more support than is commonly available today without straying into a service that would be perceived as advice to the consumer,” SJP said. “Targeted support will work best and be safest if it is a process to provide consumers with the information and help, they need to be able to make better decisions.” 

SJP also agrees that there is a space for a form of simplified, targeted, cheaper and quicker advice, alongside full holistic advice. “This proposal could be particularly helpful for consumers who are wanting to invest for the first time,” SJP said. “The challenge with this proposal is balancing the need to deliver an affordable service for consumers whilst also ensuring it is a commercially viable option for firms to offer such a product.” 

“It is vital that the industry, policymakers, and the government continue to work together to help broaden the help available to consumers. The current provision of guidance information and full holistic advice needs to be increased from both sides,” Heal added. “Part of the solution for the advice gap is providing more advice, which is largely a matter of supply. We must also ensure that we have the right structures in place to retain and attract financial advisors to the industry.”