Is financial advice just for the rich?

Are you getting the most from your savings? How should you access your pension? Could you pay less tax? Will you be able to afford care later in life?

Someone to help answer life’s relentless parade of big financial questions could be a huge relief to many of us. 

But few people receive financial advice – just 8% in 2022, according to the Financial Lives Survey from the Financial Conduct Authority (FCA).

Blame is often laid on the 'advice gap': the idea that financial advisers only want to take on clients with large sums to invest.

Here we investigate whether the advice gap is real, and explain other ways to get financial help, whatever your wealth.

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How much money do you need for financial advice?

The number of independent financial advisers (IFAs) willing to work with clients who have less than £50,000 to invest has halved from 52% in 2019 to only 26% in 2024, according to the Schroders UK Financial Adviser Survey 2023.

By contrast, the proportion of advisers who need clients to have more than £200,000 in assets before they work with them has risen from 11% in 2019 to 24% in 2024.

For context, 89% of UK adults had less than £50,000 to invest, according to the FCA’s Financial Lives Survey in 2022, potentially leaving advice out of reach for most people.

Proportion of financial advisers prepared to deal with someone with less than £49,000

This advice gap has its roots in much-needed regulation introduced in 2012 to clean up the industry. 

The Retail Distribution Review (RDR) ended most commission payments from investment and pension providers to the advisers selling their products, to ensure recommendations would be in the client’s best interest, rather than the adviser’s.

Lower commission made advisers more reliant on client fees. For advisers charging percentage-based fees, this made clients who had less to invest less profitable. 

Upward pressure on fees, and to take on wealthier clients, has been exacerbated by Consumer Duty rules. Introduced in 2023, these require all financial firms to prove they offer fair value and good customer outcomes.

• Find out more: how to find a financial adviser

How much does financial advice cost?

Many people don’t get as far as looking for an adviser. One in five of those surveyed in The Lang Cat Advice Gap 2024 report said financial advice would need to cost less for them to consider paying for it in the future, while a third said they’d need to be convinced advice would save them money.

The average cost of advice over five years for an investment worth £250,000 is £13,375 in Wales, £15,995 in the North of England and Scotland, and £16,250 in the rest of England, according to VouchedFor.

This includes investment, ongoing support and planning. It’s possible that the combination of better investment returns and lower tax bills thanks to financial advice could pay for these fees many times over, but you'll still pay regardless.

Unfortunately, financial advice fees are rarely disclosed upfront, making it harder to shop around. Fee structures can be confusing, with ongoing costs to advisers and fund managers making it hard to track how much you’re actually paying – and whether you’d be able to find a better deal.

To make the search easier, you can use services such as VouchedFor and Unbiased to search for independent advisers in your area and find out what services they specialise in.

For a good financial adviser you can trust, you should consider prioritising an independent one. A restricted adviser can only offer you products from the company they work for, meaning you might not be getting the best for your money.

• Find out more: how much financial advice costs

Could financial advice get any cheaper?

The hope is that technology can give us financial advice that still prioritises time spent in-person with an adviser, but with lower costs. This could be achieved by automating the client fact-finding process - and resulting back-office paperwork - which takes up much of advisers’ time.

Stephen Lowe, group communications director at retirement finance specialists Just Group, explained: ‘A relatively new shift, with huge long-term potential, is towards fully automated and hybrid systems, where the client interacts directly with the technology, which analyses the options, produces and implements recommendations, and reviews progress.

‘A computer is able to run more calculations than a human being and can find the optimal way to, for example, minimise income tax.’

According to the Schroders UK Financial Adviser Survey 2023, 85% of advisers expect to incorporate AI technology into their process in the future, while 17% of these advisers expected to do so in the next year. 

The same report found that 36% of advisers already outsource more than half of their portfolio management, leaving more time free for speaking directly to clients.

Are there cheaper alternatives to financial advice?

Not everyone wants or needs full financial advice, but could instead benefit from cheaper, but limited, financial 'guidance'. 

The difference between these two types of help is that people offering financial guidance can't suggest a specific product or course of action, while regulated advisers can.

Because financial advice is regulated, you have extra protection and can complain to the Financial Ombudsman Service (FOS) and potentially get some money back if the advice you received didn't take into account your life stage and attitude to risk.

• Which? Money members can access 1-to-1 guidance on a range of topics, from taxes to scams, over the phone as part of their membership, at no additional cost. You can make an appointment online here.
  
• Money and Pensions Service - The government-backed Money and Pensions Service runs two free guidance services. Pension Wise is available to anyone over the age of 50 with a defined contribution pension pot, and is an hour-long appointment over the phone on 0800 138 3944, online or in person through Citizens Advice. MoneyHelper can give guidance online or over the phone at 0800 138 7777 about any money-related topic.
• Debt charities - If the type of guidance you need is related to debt, charities like Citizens Advice or StepChange can offer free expert help. Citizens Advice runs a debt helpline at 0800 240 2240, as well as an online chat and in-person support in its local branches. StepChange also has a debt helpline at 0800 138 1111 and offers an online service to work out your budget and give debt advice.
• Money coaches - Money coaches offer an in-person and holistic look at your finances like an adviser, but can’t tell you where to put your money. Instead, these services can offer guidance on the areas that are relevant to you. The service is personalised and you’re unlikely to run across any conflicts of interest, as they’re not able to sell you anything.
• Investment platforms and robo-advisers - Some investment platforms offer coaching and advice services, but advice will be restricted to what’s on the platforms. Some coaching sessions carry a one-off charge, while others are free to users. Robo-advisers are a halfway option between ‘do-it-yourself’ investing and financial advice. They take into account your goals and risk tolerance, investing your money accordingly, but without any human interaction.

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