Foresters Financial is calling on the FCA, Treasury and Government to ensure that the proven basic advice model is not overlooked either purposefully or inadvertently as a result of the ongoing FCA and Treasury consultation on financial advice and guidance – The Advice Guidance Boundary Review (AGBR).
The call comes as Foresters launch a white paper setting out that basic advice has the potential to address a quarter of the UK financial services advice gap. The FCA estimates that 15.8 million UK adults may have needed support in relation to financial products in the last year but did not receive it.
Basic advice was introduced in 2005 to help address the advice gap for everyday families with non-complex financial needs. It is regulated and is delivered by trained advisers either face-to-face or virtually using a clearly defined ‘decision tree’ process. It covers a defined set of products such as pensions, ISAs, and child trust funds which as a group are often referred to as ‘stakeholder products’.
However the white paper raises concerns that in the drive to reduce the advice gap, the proven and cost-effective model of basic advice might be lost as new protocols are developed, such as targeted support and simplified advice.
The research concludes that basic advice has the potential to address nearly one quarter of the estimated advice gap by being suitable to help up to 4.3m of the estimated 15.8 million UK adults who could have benefitted from, but did not receive, regulated financial advice in the last year.
Foresters says it is a step up from the incoming targeted support regime and is an existing cost cost-effective and proven solution to the problem that the proposed simplified advice is aimed at addressing.
Nici Audhlam-Gardiner, chief executive of Foresters Financial, said: "We totally support the authorities drive to tackle the advice gap. That’s in everyone’s interest. However, we’re urging them not to overlook basic advice. We’re hoping that our white paper published today will help inform the debate. It shows that basic advice is tried and trusted and can easily be scaled up to help more consumers in a cost-effective way. There’s no need to re-invent the wheel. Basic advice is ideally suited to everyday families and consumers with important but relatively straightforward financial needs. It already meets the needs of people that the simplified advice protocol is being aimed at. And with modest changes to its scope, it can be scaled up at pace.
"Basic advice is already supporting the very consumers most needing of advice to make best use of their savings and to make sensible plans for their children and for themselves in later life. It would be a tragedy if it were overlooked in the drive for wider reform.’
Andrew Whyte, chief executive of the Association of Financial Mutuals (AFM), added: "The advice gap is a barrier for millions of people to achieve better financial outcomes and building their long-term resilience. Mutuals have a unique role to play in responding to this challenge. With our member-first ethos and long-term approach, we are well positioned to offer the support that people need at the time and in the way that they need it. The government has committed to support the growth of the mutual sector in financial services and tackling the advice gap is one area where the mutuals can achieve that ambition to grow at the same time as making a real difference to the lives of people whose needs are not met by the current system."
