The advice gap will never be solved if we expect people to do it “charitably rather than commercially”, according to Ruth Handcock, chief executive of Octopus Money.
Speaking to FT Adviser, Handcock discussed how Octopus Money was interacting with the industry to help solve the advice gap and how it has become a lot more open to embracing innovation.
“It's really rare that I meet a financial adviser that doesn't say 'I'd love to serve clients with any wealth levels' or 'I would love to have a firm that was more operationally efficient'.
“The openness has always been there but what many, particularly smaller firms, struggle with is the bandwidth and skills to do anything about it, which is a much easier place to be than resistance. Some industries may be resistant to change but I don't see that at all in financial advice and wealth management,” she said.
Handcock discussed how people could not expect the advice gap to be solved if it was not profitable to do so.
She explained: “The mistake in the past was that we said here is this big advice gap, just go and fill it advisers. And advisers have said, 'well, I lose money on every client that I help', so of course, you're not going to solve that problem, and neither is it fair to expect an adviser to lose money on a client that just isn't commercially sensible for them to serve.
“When you prove, and we can prove this because we've got our own customers, that the cost to serve is lower, and you can make money on customers with lower, investable assets, it's very rare you find somebody who doesn’t say 'I really want to do that in my business too'.”
Handcock emphasised that you need to prove to advisers that the cost to serve was lower because no one would do anything at scale that was not economically viable.
“If you can prove that the cost to serve makes sense for the amount of money that it's fair to charge the client, then I don't see much resistance,” she added.
Handcock believed the industry would now begin to “chip away” at the advice gap for a number of reasons, including the FCA’s advice guidance boundary review.
She said: “The review has been very positive in the industry, showing that the government and the regulator are open to different models of giving advice. This has given people a lot of confidence, which didn't exist before. So I've seen that as a bit of a step change.
