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5.5m people could lose out on financial advice in 2013

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Business advisory firm Deloitte has warned up to 5.5m people could fall into the financial advice gap after the implementation of the Retail Distribution Review (RDR).
5.5m people could lose out on financial advice in 2013

The RDR comes into effect on 31 December 2012 and changes the way retail customers pay for financial advice. Financial advisers will no longer be able to receive commissions from product providers for recommending retail investment products to customers. Instead, they will have to charge their customers for advice.

The Deloitee survey concludes that 5.5m people will be unwilling or unable to pay adviser charges.

Andrew Power, lead RDR partner at Deloitte, said:

“The RDR will affect a huge number of people in the UK, and could create 5.5m advice orphans – consumers who require financial advice but who are unable or unwilling to pay for it. Our research suggests a third (32%) of customers – particularly the less wealthy – could start doing their own financial planning, product research and administration to avoid paying for advisers.

“The challenge and opportunity for banks, insurers and fund managers is to bridge this gap by developing business models that allow them to deal directly with customers, and by offering streamlined, lower-cost advice.”

Seb Cohen, head of insurance research at Deloitte, said:

“Customers in the advice gap post-RDR with sufficient knowledge of the internet are likely to move online – proactively shopping around. Others are likely to need guidance – some form of human contact – before doing the same. Subject to regulatory constraints, there is an opportunity for providers who can cost-effectively deliver this initial guidance to savers who may lack the knowledge to go online to address their financial needs.”

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