43 million to fall into financial 'guidance gap'

24 January 2013

A report by Cass Consulting Professor Andrew Clare, in collaboration with Fidelity Worldwide Investment, suggests that as many as 43 million Britons could fall into a financial "guidance gap" as a result of the Retail Distribution Review (RDR).

The gap will comprise those people that will be without professional financial advice in the RDR world and that will not have the confidence or knowledge to make their own decisions investment decisions but who, nevertheless, will be in need of financial guidance in order to maintain the health of their personal finances.

 The report estimates the total investible wealth of this group is approximately £440billion.

It also said that it is "very possible" that more people could fall into the guidance gap over time.

 The survey suggests that the average level of investible assets needed to make a consumer commercially viable to an adviser is approximately £61,000. 75% of the UK's adult population did not have current investible assets above this level, while a further 19% preferred not to reveal the size of these assets.

The research concluded that only 31% of advisers expected to keep most of their clients.

The report also found that just 14% or 7 million UK adults say that they are likely to pay a fee for advice although 50% said that they would use a guidance service instead.

 Andrew Clare, Professor of Asset Management at Cass, said: "Sound finances are as important to our well being as sound health.

 In the absence of financial advice, trusted sources will need to provide help for those who fall into the guidance gap as they either continue their investing journey or as they look for ways to begin it.

The challenge for the finance industry in coming years will be to find ways of guiding this wealth for the long-term benefit of its owners.

 This report should serve as a wake-up call to both Government and the industry that good alternatives must be developed."

Mark Till, Head of Personal Investing at Fidelity Worldwide Investment, added: "The RDR has very positive motives but it also creates unintended consequences for the consumer.

Without access to the information they need to help them make decisions, there is a risk savers could make the wrong choices or, worse, be put off saving altogether. However, the picture is not all bad; our research identifies an appetite for guidance among both investors and non-investors who want to be pointed in the right direction without giving up control of their financial decisions.

This is a watershed moment for savers who have the chance to become more engaged and take responsibility for their financial future. However they can only do so if the industry steps up to the mark and provides its customers with the tools and information to guide them towards the right financial decisions."

View the full report