Advice Gap to rise as a result of Consumer Duty as minimum asset levels increase

Speakers at Boring Money’s Consumer Duty III conference in London yesterday thought the Advice Gap would increase as a result of Consumer Duty.

Increased governance and costs of doing business are some of the factors putting firms under pressure to review their business models and who they are servicing.

Jonathan Polin, CEO of Atmos said that “We cannot service all clients in the way they want to be serviced at a price they want to pay”.

Boring Money research has sized the 2024 Advice Gap in the UK at 12.4 million adults, with collective assets amounting to £700 billion.

Holly Mackay, chair of the conference and Boring Money CEO said,” For years I’ve used £100,000 as a rule of thumb about the minimum assets needed to seek financial advice. This number has shot up and today, the rule of thumb referenced by speakers across the board was £200,000 or higher. These higher minimums inevitably mean we will see more people fall into the Gap.”

However, the Advice Guidance Boundary Review is seen as a partial solution to this growing gap.

• Boring Money research with non-advised customers today finds that targeted support has the potential to lift over 5.3 million UK adults out of the Advice Gap.

• This suggests that up to 43% of currently unadvised consumers could be helped to make better decisions about their existing situation and products, and potentially choose new ones if appropriate

As the industry assesses potential operating models, Boring Money has tested targeted support with its readers and collaborated with Wealth Wizards to run a series of tests to show how using data to inform, guide, and nudge on a more personalised basis can lead to better customer outcomes. Some findings are shared in a free to access white paper launched today at the conference, called “When the Carrot meets the Stick” which is available for download at boringmoneybusiness.co.uk.

Boring Money’s CEO Holly Mackay comments,
” Over the course of this year we have been conducting several experiments to improve engagement and action with less confident savers and investors, which have shown really promising results. For example, engaging consumers through personalised content and creating platform provider shortlists based on demographic profiles for ‘People Like Me’ have led to notably higher engagement rates, especially among women and lower-confidence individuals.

Speaking at the event, Ben Hampton, CEO of Wealth Wizards, noted, “Consumer Duty gives us building blocks, allowing us to move from treating customers fairly to treating people well. We have shown that using data to nudge consumers towards better decisions about pensions can result in significant changes in planned withdrawal rates and tax-free cash entitlements.”

The whitepaper calls for a collaborative effort between regulators, financial institutions, and technology providers to enable targeted support to reduce the UK’s Advice Gap.

Holly Mackay adds “If an unintended but seemingly inevitable consequence of Consumer Duty is to increase provider risk and cost, and hence minimum asset levels, then the stakes just get higher for the Advice Guidance Boundary Review. If we cannot collectively make this work then we sit on the sidelines and watch as the Advice Gap just gets bigger.”

Find out more about our work supporting firms define, articulate and evidence value in our Advised Investor Tracker.

Explore the data and insights for platforms, asset managers, and advice firms on the characteristics and needs of vulnerable investors in Understanding Vulnerable Customers Report.

Download our free white paper – When the Carrot Meets the Stick – , which considers the consumer need and industry opportunity of the Advice Guidance Boundary Review.