There’s no evidence of an “advice gap” in the wake of reforms in the United Kingdom that raised proficiency requirements and did away with embedded commissions, investor advocates say.
In a submission to the Financial Advice Market Review Call for Input, the Financial Services Consumer Panel (FSCP), which represents investor views, says that it has “not seen any evidence to show the existence of a gap in the supply of professional advice.”
The submission comes in response to a joint review by the U.K. Financial Conduct Authority and the U.K. Treasury that is looking at whether consumers have sufficient access to financial advice. A frequent criticism of regulatory reform efforts from the investment industry is that tougher requirements hurt consumers by reducing the availability of advice.
“We are dubious about the argument that the cost of obtaining regulated adviceis high because firms are concerned about potential future liabilities or becausethey are unclear on where the regulatory boundaries lie. The panel has not seenany evidence that long-term liability has caused widespread issues for firms,” the FSCP submission says.
Although the FSCP does not see a shortage in the supply of available advice, the submission notes there may be a lack of take up on the demand side. Indeed, the submission acknowledges that “there is a gap in overall consumer engagement.”
“Consumers do not always seek professional advice, even when they could benefit from it: some are not aware of what is available; they do not want to pay for advice because they do not understand the price or value of it; they cannot afford it; or they prefer to take decisions themselves,” the FSCP submission says.
To address that side of the issue, “The industry needs to bemore transparent. People want to know exactly what they are paying for andwhat they are getting for it,” the submission says.