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RDR – Concerns over Advice Gap

There are increasing concerns over the effect the Retail Distribution Review (RDR) will have on mid-market clients seeking financial advice, as many believe they will be simply priced out of the market.

There are two points to be considered when looking at mid-market clients; their value to Independent Financial Advisors (IFA’s), and their willingness to pay upfront fees for financial advice.

It is thought that IFA’s will increasingly focus on higher net-worth clients, who will seek more regular and in depth financial advice, thus providing more work for the IFA. On the other hand it is widely thought that lower net-worth clients are likely to dismiss financial advice for which they must pay a fee upfront. This claim is backed up by recent research from Deliotte, which revealed that 54pc of consumers would turn down financial advice if they were charged a fee, while lead partner at Deloitte, Andrew Power, added that most of the people making up this statistic are from the “mass market”.

This entire means is that there is likely to be an advice gap in the financial advice industry, where those who find it harder to afford financial advice are increasingly ignored by the advice market.

Consumer Panel chairman, Adam Phillips said: “While we are fully supportive of the RDR in eliminating bias and raising professional standards in the industry, it may not solve the ever widening advice gap and we want the industry to look more innovatively at developing appropriate solutions”.

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