50% of advisers are finding it difficult to advise clients on the new pension freedoms if they have less than £50,000 in their pension pot, according to new research conducted by investment platform AJ Bell. Almost 1 in 5 advisers find it difficult to advise clients on pension freedoms if they have less than £100,000 and for some advisers (5%) that figure rises to £150,000.
The research brings into stark focus the key drivers of the growing advice gap in the UK. Over three quarters (78%) of the 125 advisers questioned, said they have had to turn clients away because it is uneconomical for them to give them financial advice. The main barriers getting in the way of this provision of financial advice are the costs and the liabilities associated with being a financial adviser.
An overwhelming majority (77%) of advisers said the main barrier they have had to overcome in order to provide financial advice is the regulatory costs associated with doing so. 40% of advisers said business costs were a prohibitive factor and a quarter said understanding the regulatory framework was a barrier.
Closely linked to regulation is the liability advisers have to take on when giving advice which is seen as a barrier to providing advice by just over half (51%) of financial advisers.
Billy Mackay, marketing director at AJ Bell, comments:
“These findings very clearly illustrate the problems sitting at the core of the advice gap in the UK.
“In our discussions with advisers many felt that they are paying for the mistakes of a small minority of advisers from the past. The costs associated with this are naturally reflected in the fees advisers have to charge today to run a commercial business and the result is that many consumers are being priced out of receiving good quality financial advice at a time when they need it the most.
“To their credit, the Treasury and FCA have recognised this in setting up the Financial Advice Market Review. The pension freedoms were a hugely progressive change for consumers and the FAMR could be equally successful in improving customer outcomes if it can achieve its stated objective of facilitating greater access to advice. This research suggests that looking at how regulatory costs affect the cost of advice and how that burden finds its way through to the end consumer would be a great place to start.”