You get what you pay for…and good advice does not come cheap

Last month, Professional Adviser reported on the 12 recommendations that the Personal Investment Management & Financial Advice Association (PIMFA) has made to government, regulators and the wider industry, calling for more collaboration to create an advice market that works for everybody.

I could almost hear a collective sigh from advisers reading this.

While there is nothing wrong with the premise that advice should be an affordable option for everyone in the UK, the reality is that true advice professionals carry very high overheads due to the heavily regulated nature of the business. They also have had to study hard and pass multiple exams to get their qualifications. Being an independent financial adviser is an expensive business.

Some of the points made by PIMFA are hard to argue with: promotion of the value of advice and the wider advice profession and promotion of high standards of behaviour and competence across the sector.

As Tim Sargisson points out in his commentary on the PIMFA recommendations, central to their concerns is the ‘advice gap’, with PIMFA citing four causes:

  • Lack of awareness of the benefit and need for advice
  • Lack of trust
  • Cost
  • Value for money

Tim’s main concern is that of reputation and certainly there needs to be more done to promote the good work done by the majority of advisers, but that won’t solve the issue of making advice more accessible.

Most of the established advisers I know are not short of clients so there is little incentive for them to throw open their doors to people with few assets to invest and/or a desire to pay next-to-nothing for advice.

There has to be another way to service the needs of people who are keen to save and who could certainly benefit from some sensible advice so they have a hope of securing a wealthier future.

Expecting fully qualified, independent financial advisers to reduce their costs and stretch themselves even further to embrace lower value clients doesn’t seem feasible.

So, what is the answer? I’d love to hear your views.