Here we go again. Another round of handwringing over the so-called “advice gap.” It’s always the same tune: "Oh no, how will we help the underserved masses? Let’s give them… guidance!” The regulators, industry bigwigs, and their well-funded lobbyists seem to think they’ve stumbled upon some profound solution. Spoiler alert: they haven’t.
Let’s be clear. When the FCA talks about advice, it’s not some altruistic counsel or your friendly neighbourhood guru whispering financial wisdom. It’s sales. That’s right, advice means flogging products. It’s there in black and white in the FCA Handbook: advice relates to buying or selling a particular investment (PERG 8.26). So, naturally, when they say "guidance," it’s just more sales — but sneakier. Guidance is the DIY version: selling investments without having to answer for your dodgy recommendations.
And let’s not pretend the public is crying out for this. Are consumers clamouring to be ushered into a funnel leading straight to a product purchase? Nope. The real question isn’t whether to sell with or without advice but whether we need to shove products at people in the first place. Spoiler alert: we don’t.
The Advice Gap Myth
The so-called advice gap isn’t a gap in advice. It’s a gap in sales. Advisers are laser-focused on high-net-worth clients because they need to eat, and fair play to them. But the masses with smaller pots? They’re left out because, let’s face it, selling them anything isn’t worth the industry’s time. The irony? The products that would serve the majority best are the simplest, cheapest, and least profitable to sell. As Christopher Woolard once pointed out, the “overwhelming majority” of retail investors are better off with straightforward, low-cost, well-diversified investments — things already available off the shelf. No advice or guidance needed.
So, when the industry moans about the advice gap, what they really want is permission to sell to smaller pots with watered-down rules. Sorry, not sorry, but slapping a “guidance” label on this Trojan horse doesn’t make it noble.
The Solution is Generic Advice, Not Guidance
What the masses need isn’t a sales pitch. It’s education. Generic advice — the kind that teaches people the basics, equips them to make informed choices, and points them to independent resources like Which? — is the answer. We don’t need intermediaries, regulated or not, to stand between consumers and their investments. Empowerment, not exploitation, should be the goal.
Of course, this won’t make City lobbyists or their government enablers happy. After all, they’ve spent years nudging the FCA to relax rules, allegedly to help the little guy. But guess what? The only “help” here is to their bottom line. We’ve already seen how home service sales and bancassurance died a well-deserved death because they offered poor value for money. Let’s not resurrect these ghosts in new, shinier guises.
Protect Consumers, Not Industry Growth
If the government and regulators are serious about serving the underserved, they should focus on consumer protection and access to unbiased information. The real gap is trust — not in advisers but in the entire system. People don’t need to be sold more products. They need to know they can navigate their finances without falling prey to vested interests masquerading as do-gooders.
So let’s call out the nonsense. The advice gap isn’t about unmet needs. It’s about unmet sales targets. And if the industry can’t make a business case for serving the masses without lobbying for relaxed rules, maybe it’s time to rethink the business model, not the regulations.
Guidance isn’t the answer. Education is. Let’s stop pretending otherwise.
Oh, the Treasury’s in on the act too! 🤔 Last month, they had the nerve to write to the FCA about “financial inclusion.” How noble. They’ve basically suggested the FCA should “reinforce financial inclusion” by making sure everyone can access the financial products they need to “fully participate in the economy.” Translation? A shiny new licence to flog products to the masses under the guise of bridging the “advice gap.” Because nothing says inclusion like a sales pitch, right? 🙄