Tackling the growing advice gap
Our latest Advisory Business Impact poll shows that almost three-quarters of advisers (73%) believe the advice gap has widened over the last five years, with six in ten (62%) blaming the pandemic for increasing the gap. Given the current economic environment with rising inflation, a cost of living crisis and looming recession, it’s unlikely that the need for professional financial advice seems will change any time soon.
Increasing demand for advice
Against this backdrop, it’s not surprising that demand for advice continues to grow: in difficult times like these, having a financial plan in place is crucial to maintaining a sense of control over your money. This is borne out by the fact that more than half (58%) of the advisers in our survey have seen an increase in people seeking advice in the last 12 months.
However, while demand is increasing, the supply side is not. The number of advisers in the UK increased by just 3% in the two years to 2020 according to FCA figures, and many advisers plan to leave the industry or reduce their levels of business in the next five years according to a survey last year by Dynamic Planner.
The issue of demand for advice outstripping supply is highlighted in our survey, with a third (34%) of financial advisers feeling they don’t have time to service any more clients while a similar number (31%) say they don’t need more clients. And it’s the lower value clients who are most likely to lose out: nearly a third (29%) of respondents lack the time and resource to service lower value customers. Additionally, over two-fifths (45%) of firms argue that the high cost of servicing clients won’t be covered by those on lower incomes, which prevents them from extending their services to those who typically don’t access advice.
Bridging the gap
However, there are ways that we as an industry can work together to bridge the advice gap. Initiatives to attract and train the next generation of talent to the industry, like The Verve Foundation’s We Are Change programme which is supported by intelliflo, will make a difference to adviser numbers over time.
We were also encouraged to see from our survey results that many firms are taking positive steps to help those who are less likely to take advice. Over the last 12 months, more than two-fifths (43%) have hired junior advisers to take on some lower income clients, and the same number (43%) have taken on lower income clients as wealth in waiting. Over a third (35%) have carried out pro bono services, while a quarter (26%) have provided free advice workshops.
In addition, four in ten (39%) firms have trained non-tech-savvy clients on how to use technology in the advice process. In fact, 95% of advisers believe that technology is crucial to bridging the advice gap and reaching those who don’t typically access advice.
At intelliflo, we firmly believe that adopting technology to its best effect will make it possible for the sector to reach thousands more clients and, not only that but help people engage more with their financial plan. Embedding technology effectively into the advice process helps deliver cost savings through improved efficiency and economies of scale that firms can pass on to clients through lower fees. It can also deliver a viable business case for widening access to advice by increasing the profitability of working with clients with lower investible assets.
With continued economic uncertainty and growing pressure on income at every stage of our lives, it’s clear that more people would benefit from taking professional financial advice. By working together, we can continue to find ways to make advice accessible to a broader range of people to help them achieve better financial outcomes.