Nov 11, 2021

Millions left behind by worsening advice gap, Open Money warns 11th November 20218:23 am The financial advice gap continues to widen and advisers must do more to ensure millions are not left behind. This is because advice is valuable and could improve their standard of financial wellbeing. The call was made by Open Money co-founder Anthony Morrow at a Lang Cat HomesGames chat on Wednesday (11 November). Morrow said the more exclusive regulated financial advice becomes the harder it is to champion as being important for people’s money. A recent survey by Open Money on the advice gap in the UK found that six million people want advice but think it costs too much. It also found that fewer people are looking for advice this year compared to the previous two. Morrow said the advice sector has a role to play in engaging with the unadvised part of the market that is huge. But he stated there are mixed messages coming out of the sector around simplified advice and guidance that puts people off. He conceded that it is difficult to create solutions for people who do not have lots of money adding that “it can’t be done as a side project to your main business. It’s not easy and it’s not cheap”. Morrow suggested the advice profession should deal with the affordability issues while taking the wins that the Retail Distribution Review (RDR) had afforded them. He stated that RDR, which was introduced to improve consumer outcomes from financial advice and guidance, had been very good for the advice sector. He said: “The industry is in a much better shape now than pre-RDR. The quality of the products is better, there is more transparency, the level of professionalism has increased with qualifications and the fee charging structures have been removed. “On their own these are not going persuade anyone to take advice or suddenly make advice more accessible or affordable.” Morrow added: “It was fanciful to think RDR was going to be a panacea and solve all of the problems for people. There is a very strong argument that RDR didn’t help very much in terms of making advice affordable.” He said Open Money is working to bridge the advice gap by providing free advice and low fees. “We started out clearly trying to keep our cost down to a level where we knew that part of the population were willing to engage and that meant having to accept a really narrow range of areas that we would advise on.” He added that technology and the hybrid model had made it feasible to help more people get free advice. “We could not exist as a face-to-face model. About 70% of the customers who come to us who want to invest or consider investing are told not too because they are not in a position to do that. “We have to expand the proposition to accommodate those people while we tell them they cannot invest now because of debt; lack of savings and we don’t want them to take any risks. “Our recommendation then will be don’t invest. We’ve delivered over 100,000 recommendations in four years and you simply could not do that on a face-to-face basis. We’ve built the technology to enable us to do that at scale with a very negligible and incremental cost. If we could deliver one piece of advice a day or 10, 000 the incremental cost is nothing in terms of delivering that.” Morrow said there is so much money now flowing into the advice sector from private equity and consolidation. But very little of it is invested in technology and the recruitment of new staff, particularly young people. He stated that advisers through their trade bodies should be doing more to promote the value of advice. He highlighted the challenges the sector faces in getting out a consistent message due to the large number of small businesses and the bickering among advisers. “If you can’t get your own house in order and get a consistent message out there. It makes it difficult to do that,” he said.