Professional advice is now only sold with about one-third of the financial products that are available today- back in 2012 only 40% of products were sold without this advice.
This revelation has led the government to launch an enquiry into the industry- a move that has been back by the FCA and the Treasury. The two bodies stated that the number of advisers available in the sector had fallen by 2,000 in the last two years, meaning that there are now only 24,000 in total. They stated that this means many customers are now forced to rely upon general pieces of information rather than specific advice.
The government have stated that they wish to “radically improve access to financial advice” and will consider ideas such as making regulations more simple, increasing competitiveness and introducing “robo-advice”.
The first action taken by the review was to request input from companies and individuals. It will begin by focusing on persons “with some money but without significant wealth” and has defined these people as individuals who earn less than £50,000 per annum.
The acting chief executive officer of the Financial Conduct Authority, Tracey McDermott, has stated:
“The financial decisions people make can have long reaching effects. It is important that the market provides accessible and affordable advice when people need it.”
The Treasury and the FCA have identified high cost and overconfidence in one’s financial expertise as two of the main reasons that people do not seek financial advice.
This review has been praised by the funds and pensions industries, who believe that more financial advice is required now that individuals now have a lot more freedom to choose what they do with their pensions.
The Investment Association’s temporary chief executive, Guys Sears, has welcomed the news:
“The Investment Association agrees that the time has come for the government and regulators to tackle the ‘advice gap'”