Up to 5.5 million people could fall into the financial advice gap after the implementation of the Retail Distribution Review (RDR), according to research from Deloitte, the business advisory firm.
According to the survey, 5.5 million customers could fall into the advice gap because they will either be unwilling or unable to pay adviser charges.
Some 16 million people own a retail investment product to which adviser charges apply and half (46 per cent) use an adviser to buy such products.
Andrew Power, lead RDR partner at Deloitte, says: “The RDR will affect a huge number of people in the UK, and could create 5.5 million advice orphans – consumers who require financial advice but who are unable or unwilling to pay for it. Our research suggests a third (32 per cent) of customers – particularly the less wealthy – could start doing their own financial planning, product research and administration to avoid paying for advisers.
“The challenge and opportunity for banks, insurers and fund managers is to bridge this gap by developing business models that allow them to deal directly with customers, and by offering streamlined, lower-cost advice.”
Seb Cohen, head of insurance research at Deloitte, says: “Customers in the advice gap post-RDR with sufficient knowledge of the internet are likely to move online – proactively shopping around. Others are likely to need guidance – some form of human contact – before doing the same. Subject to regulatory constraints, there is an opportunity for providers who can cost-effectively deliver this initial guidance to savers who may lack the knowledge to go online to address their financial needs.”
Deloitte’s findings will be highlighted in the report “Bridging the advice gap”.