Research shows that over half of financial advisers are turning clients away as they grapple with the UK Consumer Duty regulation.
A financial consultancy, called the lang cat, also said its research shows four fifths of advisers said the Consumer Duty made it harder to service more clients.
The firms described the situation as increasing the “advice gap”, with fewer people paying for and benefiting from financial advice following the introduction last year of the Consumer Duty regulation.
Research took place among 2,000 British adults and 200 financial advisers and shows that just 9% of people now pay for financial advice, down from 11% in 2023.
“This is despite the biggest regulatory overhaul of the financial services sector in a decade that was introduced to provide better outcomes for consumers,” said lang cat.
Mostly impacted are people with low investable assets and over half (55%) of advisers have stopped serving them.
The findings suggest that “many advisers have used Consumer Duty as an opportunity to rationalise their client numbers”.
Consumer Duty exists to ensure that products and services are clearly targeted at appropriate consumers.
However, more positive findings included that of those who pay for advice, 91% find it helpful, with this figure jumping by 14% over the past two years. Over half (56%) said they valued the service and more than a third (37%) said taking the advice gave them peace of mind about having enough money in future.
Cost is the main barrier to people seeking paid advice with one in five (20%) writing off the process as they think it’s too expensive.
Mike Barrett, consulting director at the lang cat, said: “Consumer Duty has triggered a major overhaul of the advice sector. The requirement to have a clearly defined target market, and represent fair value, has naturally resulted in advisers ensuring they offer their services to those with the most assets and complex needs.
“This is not a criticism of the profession- in fact it makes complete sense. Advisers run businesses; they are not paid to deliver social policy. However, change is required to ensure more consumers can access financial advice and support when needed.”
