In this Guest Column for Financial Planning Today, Ilana Miller, investment lead, distribution at Royal London, looks at some potential answers to the advice gap.

The introduction of the Consumer Duty has led to many voicing concerns that an unintended consequence of the new rules will be an increase in the advice gap. 

Historically, adversity and change has served as a catalyst for innovation and advancement and we are seeing the shoots of that now. Of course the advice gap has existed for some time, yet never have so many been focused on solving it as now.

Closing the advice gap will not be easy, however, and some consequences of the Duty may not be helping.

Adviser research* in May, carried out by my company Royal London, found an increase in firms raising their minimum portfolio size. The Lang Cat’s recent Advice Gap report** found 55% of advisers had stopped serving certain clients and Investment Trends*** estimates three in ten (31%) adviser firms are gradually phasing out lower value clients, and 17% have an enhanced focus on high net worth clients.

While research suggests the Duty may be leading to fewer people having access to financial advice, it is far from inevitable. If true, it is an outcome the industry should and must reverse.

Could Gestalt be the answer? A German word roughly meaning ‘whole’, Gestalt theory proposes that the unified whole is greater than the sum of its parts. In the context of financial services, this means a collaboration of all businesses in the chain, each focused on their area of expertise. This can create more powerful and effective solutions than any individual entity.

Take the agricultural sector, as an example. It has faced significant demand challenges to feed a growing global population while safeguarding the environment.

Farmers couldn’t meet the changing needs alone, and instead it took everyone in the supply chain from manufacturers developing machinery and other equipment to reduce time and the intensity of manual work, to technology offering sensors, GPS drones and satellites to monitor crops, helping farmers take targeted action.

Such developments across the ‘unified whole’ have been instrumental in addressing the challenges of ‘food supply’ by increasing efficiency and in turn capacity. 

We know Financial Planning firms have serious demands on their time - clients, regulation, operations and dealing with providers. To address the advice gap effectively, the other ‘parts’ must create innovative solutions with brilliant support to help Financial Planners provide the services they want to deliver.

More firms now want to offer services such as full holistic planning, cashflow and financial coaching and education as standard to all clients but find, due to cost, they would need to disengage with clients below a certain portfolio size, or charge additional fees. 

However, like agriculture, financial services has its own chain of expertise, including experts in planning, investment, products, technology and compliance. If those providing these services can take cost and time out of that process in a way that prioritises the client needs, charges fairly and maintains quality, then there is an opportunity for firms to expand the number of Financial Planners and to serve a wider range of clients and reduce the advice gap.

There are some fantastic communities and alliances committed to doing outstanding work to expand the number of planners by helping to attract new talent to the profession, putting collaboration ahead of competition and having some real success. 

This could be a future where good Financial Planning is as accessible and personalised as ordering groceries online, where planners and advisers can leverage cutting-edge technology to provide real-time insights and tailored solutions to help more people live the life they want is achievable - especially with Gestalt!

*The adviser research was conducted by Opinium for Royal London from 17 May to 10 June 2024, with 528 respondents comprising business owners, client facing, hybrid and fully remote advisers as well as paraplanners.  

**The Advice Gap 2024 - The Lang Cat
***Source: Investment Trends March 2024 UK Adviser Technology & Business Report

Ilana Miller is Investment Lead, Distribution, at Royal London