Nic Cicutti: The advice gap has always been there


When I started writing for Money Marketing many years ago, our highly enlightened editor at the time believed passionately in the need for all his journalists to go out and meet as many IFAs as possible.

So it was that for the 18 months I worked on the paper as a full-time writer, I travelled thousands of miles and met, literally, many many hundreds of financial advisers. Quite a few are still my friends today.

One in particular, who told me the story of his “success”, struck me as emblematic for the IFA industry as a whole. He started out in the early 1980s by knocking on every single door in his area. More often than not, people slammed the door in his face. But over the years, this IFA ended up with scores and eventually hundreds of clients who became the backbone of his burgeoning business.

Even then, more than 10 years after he started out, he confessed that many of his early clients were hardly “worth” seeing on a regular basis. The volume of business they brought in relative to the amount of time they took up simply didn’t stack up financially. As often as not they’d call him about an issue and he’d do his best to offer advice, without earning a penny from them.

Yet he remained doggedly loyal to his clients: “Without them at the beginning I’d be nowhere now. Besides, where else could they go for help?”, he told me simply.

There’s no doubt in my mind every reader of this column has at least one “client” like that, or quite a few in some cases, someone they started out with and whom they continue to help virtually for free.

Apart from anything else, in much the same way as Roman generals used to have a slave whispering: “Remember you are a mortal,” in their ear during triumphal parades, these former clients are a reminder of when they began scratching out a living from financial advice all that time ago.

I was reminded of this story by a column from Neil Liversidge in last week’s Money Marketing. Neil writes about meeting up with a few “industry luminaries” to discuss issues facing the profession. “One was the advice gap, something that has become increasingly obvious, greatly exacerbated by the RDR.” Apparently, my heart would have “warmed” to learn of such a conversation.

At the end of this anguished discussion Neil’s conclusion was simple: “I suggested we just drop Dave Cameron and Martin Wheatley a line pointing out that the gap exists, admitting we cannot fix it and inviting them to try.” Very heart-warming indeed.

Ironically, knowing that deep down Neil is a big-hearted softie, I suspect he doesn’t really mean it. I bet that Neil, like lots of IFAs, will always have a list of clients he will never get rid of, now matter how little they add to his bottom line.

My real issue is with this “advice gap” that everyone talks about. I mean, how big is it really? My gut instinct is that this “gap” has always been with us. Eleven years ago, for example, the ABI was talking about a £27bn “savings gap” with regard to people’s retirement plans.

Or looking at protection, the central need for most working families, back in 2005 Defaqto reported that less than 150,000 income replacement policies were sold and just 600,000 critical-illness policies, half their high-point a few years previously.

In 2009, when the RDR was barely a glimmer on the horizon, Defaqto found that 45 per cent of the population had not bought any type of protection cover, even of the most basic sort.

Some 72 per cent were saving less than £100 per month and 35 per cent were saving nothing at all. Significantly, only a third of people had their mortgages covered in the event of anything happening to them.

In 2010, the ABI reported that £1.9bn was paid out to more than 40,000 families and individuals through critical illness and life insurance policies. More recent figures suggest that some 56,000 claims were made and 53,000 people received payouts.

In April this year, the ABU reported that in 2011 some £6.7m a day was paid out to claimants. This was up on £5.9m a day a few years earlier but only because of the introduction of proportionate settlement, less fishing expeditions at the point of claiming and better underwriting.

Yes, that’s £2.5bn that helps many thousands of people each year. But let’s not kid ourselves that the total paid out annually covers anything other than a miniscule minority of people who should have taken out protection yet failed to do so.

In other words, the “gap” everyone talks about as if it were a looming phenomenon has been with us for more years than anyone cares to remember. IFAs, meanwhile, have been pruning their client lists for years, as a cursory search through Money Marketing online, not to mention my own conversations with advisers bears out amply.

Yes, there is an advice gap. There always has been. The task for advisers, as ever, is to find profitable ways of reaching as many clients as possible – without romanticising the past or blaming regulatory changes for something that has always been there.

Nic Cicutti can be contacted at