It’s been over a decade since the Retail Distribution Review (RDR) was introduced, aiming to deliver fairer and more transparent customer outcomes. Yet, for most of the UK population, the reality has been starkly different.

Financial planning advice has become increasingly inaccessible, leaving the majority of consumers shamefully underserved. Since 2013, banks have retreated from serving lower-asset clients, instead catering almost exclusively to high-net-worth individuals (HNWIs). Today, the number of consumers paying for financial advice is just 9%. 

I believe the problem lies in the heart of this question: is financial advice simple or complicated? For many, it’s perceived as too complex to engage with. But I say it can, and should, be simplified to better serve the wider population.

Recent regulatory shifts, like the Boundary Review and Consumer Duty, have issued clear warning shots to the industry: rethink how advice is delivered and who it’s designed for. I’ve seen firms respond by hiring junior advisors and paraplanners to address portfolios overloaded with clients. However, for planners managing 250 clients or more, it’s impossible to deliver the level of care that annual advice fees promise. 

Take, for instance, the guidance issued by Sense, a network of 137 member firms. They’ve reminded advisors of their obligation to conduct annual reviews, allowing a three-month grace period before advice fees must be switched off. It’s a step in the right direction, but these measures alone won’t solve the problem.

While there’s hope in new entrants stepping forward to fill the advice gap, history reminds us to remain cautious. If we’re to avoid repeating the mistakes of the past, the industry needs to embrace bold and innovative solutions.

How to avoid the mistakes of the past

1. A call for accessible advice

In the old days, high street banks would welcome clients with modest assets, guiding them through their financial journeys. But that approach unravelled post-RDR, as stricter regulations and higher competency requirements drove advisors out. 

The re-entry of firms like Barclays and HSBC into the retail advice space signals hope. However, the focus is on the “mass affluent” – individuals with investable assets upwards of £100,000. For the vast majority left behind, non-advised services could bridge the gap.

Non-advised services might not generate the same fees, but that doesn’t mean they can’t build trust and loyalty. Take someone with a £50,000 windfall and a modest income. Under current models, they’re unlikely to get advice beyond inflation eroded cash products. But offering guidance through a suitably trained individual, even if it’s not full financial advice, could make all the difference.

Not only does it provide immediate value, it also strengthens client relationships, making them less likely to move their business elsewhere.

2. The risks of over-relying on technology

A common question advice firms ask is: “How can we service lower tier clients without it costing the same as servicing our HNWIs?” It’s not a particularly ethical question, but from a business perspective, it’s not unreasonable.

For many, the answer lies in technology. But while robo-advisors and hybrid models promise efficiency, they often fail the clients who need the most guidance: those who lack financial literacy (who also happen to be the less wealthy).

A robo-advisor, no matter how advanced, can’t replace the human connection people need to navigate complex decisions, especially older clients facing milestones like retirement. Directing these individuals to an app or website with limited support leads to one of three outcomes:

• They log off thinking it isn’t worth the hassle
• They commit to something they don’t understand
• They ask their friend down the pub what to do, who suggests investing in a random fund or shares on Trading 212

So, what can be done? Many firms still operate sizeable telephony units to reduce the costs of face-to-face meetings. This model works well in mortgages – so why not extend it to financial planning? Video consultations strike the right balance between accessibility and cost-effectiveness. I wouldn’t be surprised if firms like HSBC, rather than reopening the 100+ branches they closed in 2023, chose to invest in video-based advice units instead.

3. Collaboration is key

Many advice providers operate with a highly restricted range of products. While this doesn’t mean those options are bad, it does mean they won’t be suitable for everyone. 

Historically, instead of acknowledging these limitations, some advisors massaged clients’ needs to fit their offerings. This “square peg, round hole” approach undermines trust and leads to suboptimal outcomes. In other cases, advisors simply sent clients away to seek guidance from an independent financial advisor (IFA), often with no follow-up to ensure their needs were met.

The lesson is clear: if firms have a duty of care to their clients, they must collaborate with other organisations to fill the gaps in their service offerings. By partnering with IFAs or other specialists, firms can offer clients tailored solutions that truly align with their needs, without overstretching their in-house capabilities.

This kind of collaboration benefits everyone involved, fostering client trust, expanding service reach and ultimately strengthening the industry.

4. FCA: Go easy, guys

The Financial Conduct Authority (FCA) has a critical role to play in shaping the future of financial advice. But they need to understand that overly rigid frameworks don’t work. To empower firms to innovate, serve underserved markets and restore public confidence, the FCA must balance oversight with flexibility.

Simplified advice frameworks, designed to provide basic guidance without the complexities of full financial planning, could be a game-changer, and the FCA are already testing the feasibility of this with small advice firms. This approach would not only help firms expand their client base but also maintain the regulatory compliance necessary to build trust across the industry.

Building trust and expanding access

Ultimately, the future of financial advice depends on our ability to rebuild trust and expand access. This requires a commitment to transparency, collaboration and innovation. Firms must prioritise customer-centric solutions, whether through accessible advice models, strategic partnerships or thoughtful use of technology.

By learning from history and embracing a more inclusive, adaptable approach, we can ensure that financial advice serves everyone – not just the privileged few.

If your firm is looking to adapt to this shifting landscape, let’s start the conversation. At Hanover, we specialise in connecting businesses with the right talent to meet today’s challenges and seize tomorrow’s opportunities. Contact me directly to learn more.