As the Financial Conduct Authority (FCA) prepares to give the green light to targeted support, the financial advice landscape is on the brink of significant change. Neil Griggs, Partner, and Gavin Sharpe, Director, Risk Assurance, RSM UK, explore how the introduction of targeted support is expected to accelerate the growth of technology-driven solutions. As well as how it’s set to reshape a market that is currently dominated by traditional, face-to-face, advisor-led services.
While the introduction of targeted support promises greater accessibility and affordability, it also raises an important question; will there be a clear route to personalised advice for those customers who may benefit from a more traditional service?
The advice gap: a persistent challenge
The UK’s advice gap remains a pressing issue. According to the FCA’s Financial Lives survey*, only 9% of adults received financial advice on their pensions or investments in the past year. This is despite the fact that 7 million adults hold savings of £10,000 or more – a level at which professional advice could make a meaningful difference to long-term financial outcomes.
For many, the cost of traditional advice remains a barrier, and millions of consumers are left to navigate complex financial decisions alone, often relying on informal sources or social media ‘finfluencers’, some of whom have faced legal action for promoting unregulated (and often fraudulent) financial products. The introduction of targeted support aims to bridge this gap, but will it go far enough?
Technology as a catalyst for change
Targeted support is expected to drive rapid adoption of fintech solutions and digital platforms, offering consumers quick and easy access to investments. These tools promise to deliver cost-effective, scalable advice, making financial planning more accessible to a wider audience.
For digitally savvy consumers, particularly Gen Z, this is welcome news. They are comfortable using apps and online tools to manage their finances, and are likely to embrace solutions that combine convenience with affordability. In an era of rising living costs, the ability to make money work harder without incurring high advisory fees is an attractive proposition.
Opportunities and risks
While the benefits are clear, the shift towards tech-led advice is not without risk. Al and automation will play a central role in reducing the cost of delivering advice, but these innovations must operate within a robust regulatory framework. Without proper oversight, consumers could be more exposed to unsuitable recommendations, or even fraudulent schemes.
There is also a danger of creating a two-tier market: one for those who are comfortable with digital tools and another for those who are not. Older consumers or those less confident with technology may find themselves excluded, potentially widening the very gap targeted support seeks to close.
The role of regulation
The FCA will need to ensure that the regulatory framework surrounding digital advice solutions protects customers (and the firms offering the products) in a clear and proportionate way. Recent cases involving so-called “finfluencers” highlight the risks of unregulated advice and underscore the importance of maintaining trust in the financial services sector.
Regulation must strike a balance to enable innovation while still safeguarding consumers. Too much red tape could stifle progress, but too little could lead to harm and erode confidence in the market.
What does this mean for advisers?
For IFAs, the rise of targeted support and digital solutions represents both a challenge and an opportunity. On one hand, competition from low-cost fintech platforms, either offered by new players or the large established banks, could put pressure on traditional business models. On the other, advisers who embrace technology can enhance their service offering, improve efficiency, and reach new client segments.
The future is likely to favour a hybrid approach, combining the personal touch of human advice with the scalability of digital tools. Advisers who can integrate these elements will be well-positioned to thrive in the new landscape.
Closing the gap, but not eliminating it
Targeted support is a positive step towards making financial advice more accessible and affordable. It will help to narrow the advice gap, but it is unlikely to eliminate it entirely. Unless the industry finds ways to integrate digital and traditional advice models, we risk creating parallel markets; one for tech-savvy consumers and another for those who prefer face-to-face interaction, with a gap in the middle for those who fall between the two.
To bridge the advice gap, new tech solutions need to build in signposting for consumers who may need a more tailored form of advice, which could help them take the leap from saving to investing.
In summary
- Targeted support will accelerate the adoption of tech-based solutions, disrupting the traditional IFA market.
- Al and automation can lower costs and expand access, but adequate regulation is critical to protect consumers.
- Advisers must adapt to a hybrid model to remain competitive and relevant.
- Without integration, the advice gap may persist, leaving some consumers underserved.
The financial advice sector is entering a new era: one that promises innovation, inclusivity, and improved outcomes for many. But success will depend on collaboration between regulators, advisers, and technology providers to ensure that no one is left behind.
*https://www.fca.org.uk/financial-lives/financial-lives-2024
About Neil Griggs
Neil is RSM’s asset management and wealth sector leader and oversees the firm’s audit, tax and consulting teams operating in the wealth management sector. He also works closely with RSM’s global asset management and wealth community to advise on the complex cross border needs of clients. Neil is an experienced audit partner with clients across the hedge, wealth, paytech and capital markets sectors.
About Gavin Sharpe
Gavin Sharpe specialises in providing risk assurance and advisory services to a range of financial services institutions. With over 11 years in the industry, Gavin is an expert in advising clients on complex treasury, asset and liability management and prudential regulatory issues, supporting a variety of firms including small, solo regulated entities, banking institutions, PE-backed consolidators and large FTSE-listed wealth management groups.
