The growing advice gap is a topic of conversation in many rooms, from meeting rooms in Stratford to concerned consumer interest groups.
Questions are often asked about the availability of advice framed in context of current demand, but what do leading indicators tell us about future demand?
The known factors that are likely to lead to an increase in the demand for financial advice include:
- Reducing access to defined benefit pensions for most workers, adding further pressure to the choices made at-retirement.
- The almost effective removal of the tax allowances that have simplified investing and saving for the past 15 to 20 years.
- The potential intergenerational wealth transfer – an issue still discussed more by industry figures than it will be amongst most families in the UK.
Like many parts of life, big tech companies have insight that can help to tell us what is coming; Google trends show the popularity, and growth in popularity, of searches in relative terms. Looking at related and overlapping terms, the acceleration of demand for financial advice around retirement from UK searches is clear.
Searches for ‘pensions advice’ and ‘retirement advice’ have both shown recent surges to seemingly sustained relative popularity. By comparison, searches for support services such as MoneyHelper and Pension Wise have remained relatively static, with an occasional spike in interest.
Even searches for the state pensions age have been popular in recent weeks, which is perhaps a better general indicator of the national interest in retirement.
Some of this demand will be short-term and driven by the news cycle and expectations of significant legislative changes from the new government, but it does not seem reasonable to infer that these trends are exclusively short-term noise.
The challenges in the supply chain for financial advice and guidance seem likely to persist:
- financial adviser numbers remaining stubbornly level, as the number of advice businesses reduces through consolidation;
- abandonment of simplified advice as a regulatory construct to allow advisers to serve more clients more easily;
- failure of other regulatory initiatives like the investment pathways to meaningfully support customers entering retirement; and
- Pension Wise being swamped with appointments, taking between 2 to 4 weeks to access in normal circumstances and in excess of 8 weeks in busier periods.
When I was growing up, I remember parents and family friends occasionally scrabbling around to find an acquaintance that could offer some legal or tax advice, but never struggling to access financial advice.
However, it seems that for later generations, financial advice will likely be added to that list, which belies the importance of informed long-term planning for generations that face a substantially less secure retirement than those that came before.
It is not all bad news: large parts of the financial services industry are spending much of their time now looking for ways to make advice, and specifically retirement planning, more efficient and effective. Although this innovation needs to be commercially viable, so it is only ever likely to solve a portion of the problem.
Equally, technology, integrations and investment products can only provide so much of the solution.
In light of the current situation, it seems reasonable to ask whether the current regulatory and legislative focus and activity seem likely to solve this problem over any period of time. I think the answer is not as positive as it needs to be.
The current focus on customer outcomes and value is laudable but is inward looking, with no considerations of outcomes for those customers outside of the systems it polices.
