The basic advice model has helped millions with simple financial problems, experts say, but warn it is at risk of being overlooked by the introduction of targeted support.
Basic advice could address as much as a quarter of the advice gap, according to Foresters Financial, which said the model is a ‘proven and cost-effective’ solution.
First introduced in 2005, basic advice was intended to allow firms to provide simpler and lower-cost advice to customers who have less-complex financial needs.
The model uses questions that are been pre-scripted, still in the form of regulated financial advice that is delivered by trained advisers either face to face or virtually. Basic advice covers specific products like pensions and Isas.
According to Foresters Financial, it is the only firm that has offered basic advice in an economically viable way, but that ‘technological advances and the safeguards we have implemented create the potential for widespread adoption among many firms.’
It says that basic advice ‘could easily be offered by many more organisations’, and that this would help to address the advice gap.
Targeted support is intended to enable financial companies to offer suggestions to consumers based on ‘reasonable assumptions’ about their finances
Foresters Financial says the model is used to many of its 1.3million customers, being used in 100,000 customer interactions each year. It says that basic advice has the potential to address the needs of at least 2.5million, but up to 4.3million of those who require financial advice.
According to estimates from the Financial Conduct Authority, around 15.8million adults may have needed support relating to financial products over the past year but did not receive it.
Foresters Financial’s report calls for the Government to widen the scope of basic advice and encourage wider adoption of the model across the financial sector.
Nici Audhlam-Gardiner, Chief Executive of Foresters Financial said, ‘We totally support the authorities drive to tackle the advice gap. That’s in everyone’s interest. However, we’re urging them not to overlook basic advice.
‘We’re hoping that our white paper published today will help inform the debate. It shows that basic advice is tried and trusted and can easily be scaled up to help more consumers in a cost-effective way.
‘There’s no need to re-invent the wheel,’ he added.
Audhlam-Gardiner said: ‘Basic advice is ideally suited to everyday families and consumers with important but relatively straightforward financial needs.
‘It already meets the needs of people that the Simplified Advice protocol is being aimed at. And with modest changes to its scope, it can be scaled up at pace.’
Targeted support is intended to enable financial companies to offer suggestions to consumers based on ‘reasonable assumptions’ about their finances.
Unlike the existing basic advice model, targeted support won’t be classed as regulated advice, and instead will be based on what customers with similar situations do with their money.
Earlier this month the FCA launched a consultation on the proposed targeted support service, calling for financial firms and consumer groups to weigh in, with the Government looking to roll out targeted support from early next year.
The Government says targeted support is particularly aimed at helping new investors, as well as those under-saving for retirement and those struggling with knowing when they should access their pension.
Audhlam-Gardiner added: ‘Basic Advice is already supporting the very consumers most needing of advice to make best use of their savings and to make sensible plans for their children and for themselves in later life. It would be a tragedy if it were overlooked in the drive for wider reform.’
