Scope to diverge
Add to that the current suitability requirements, which create a real cost barrier for advisers looking to help investors with smaller amounts to invest. But Harrington does think there is some scope to “diverge” from suitability requirements “to ensure that an individual receives a good outcome, which is better than doing nothing at all” and staying wholly invested in cash.
He adds: “A more streamlined process, which provides the support savers need, would move the dial more towards advice than what we currently have, which is sales.”
The existing system certainly does not help those with smaller investment amounts or relatively less need for ongoing advice, according to Alex Lambert, external relations manager at Hargreaves Lansdown. This advice model does not necessarily suit client needs and could be tweaked to address this.
One size does not fit all
Lambert adds: “Traditional advice services are set up to suit the adviser, not the client. Advice is expensive, pricing out the majority. In our experience, lots of people don’t need ongoing annual reviews, meaning they’re getting poor value for money at best, and in most cases, end up paying for something completely unnecessarily.
“There's certainly no one-size-fits-all offering, and the best advisory services should put clients in control of where and when they take advice, and on what issues. It should be possible to dip in and out of advice as needed, which may mean long periods of time between getting advice.”
This is one of the reasons Hargreaves Lansdown has moved towards a system where it uses tailored messaging and nudges and more personalised guidance to help investors diversify their portfolios.
Lambert says: “We have evidence this works through our Better Investors programme… but we’d like to do much more. With 1.7mn clients, we’ve amassed 12mn client years of data over the past decade, and we want to better use this data to improve client outcomes.
“To achieve this shift, the rigid rules around regulated advice need to be updated to reflect modern communication methods, and the way in which we can use data analysis to improve long-term investment outcomes. We believe it is possible to flex the advice rules to allow for more helpful tailored content, within a framework that also ensures consumer protection.
“As it stands, the advice/guidance boundary gets in the way of our ability to engage our clients using targeted messaging and guide them to better outcomes, and for clients who wish to dip in and out of advice, they should be able to do so seamlessly.”
Barriers to advice
