Two events recently have helped me form a suggestion for how we can solve the problem of the majority of people in the country being unable – and often uninterested – in taking financial advice. The so-called ‘advice gap’.
The first was a round table discussion with HMRC and the FCA. I was impressed that this event happened at all, there was a clear interest in hearing the ideas of the adviser community. There were some really interesting ideas put across, along a few inevitable self serving suggestions that were less helpful.
If we’re going to solve this problem, we need to think a little wider than our own business models.
The second was a conversation with Damian Davies of The Timebank, a man who clearly cares. We knocked a few ideas around, so I need to credit what follows as being in no small part down to him.
Let’s look at some resources that are available. Firstly, there is the £120m currently being spent by the Government on giving financial advice to the public (MAS, Pension Wise, Pensions Advisory Service).
Secondly there are the 28,000 authorised financial advisers in the UK.
If we assume that one adviser can only realistically deal with around 100 clients (an arguable point, but go with it), that means that the adviser community can reach a maximum of 2.8m clients. Many of these will be couples, so let’s say 5m people take financial advice. That leaves a lot of people we simply cannot reach, even if we wanted to and they could afford to pay us.
Plugging the advice gap cannot come from the adviser community. Or can it….
Most advisers do some sort of pro bono work. It might be seeing someone for a free initial consultation that you know will not sign up as a client, it might be helping at the local Citizen’s Advice Bureau. My proposal is therefore to build on the knowledge and goodwill of the adviser community.
With these points in mind, here is my suggestion:
- The Government set up an organisation to facilitate free financial education sessions (perhaps use an existing organisation such as the Business Links or Chamber of Commerce). In the workplace, in sixth form colleges, universities, local village halls, anywhere and everywhere
- These sessions are delivered by registered individuals. They give their time for free
- The sessions count towards CPD, and every adviser is expected to a certain amount each year – perhaps 1 hour per month.
- That’s 336,000 1 hour sessions per annum. 20 people attending each session, that’s 6.7m reached. Each year.
- The adviser is allowed to mention their services for those attendees who might be in a position to engage a financial adviser
I believe this would create a dialogue between the professional advice community and the general public which, after a few years, would considerably improve the trust of advisers which is quoted as being such a major factor in preventing people taking advice.
What do you think?