Just 7% of advisers currently have plans to offer a stripped back “core advice” service for their ISA customers, according to new AJ Bell research.

Conducted as part of the firm’s response to the Financial Conduct Authority (FCA) consultation, which closes today (28 February), the findings illustrate the inherent challenges involved in creating a viable system for the delivery of financial advice to retail investors with smaller amounts of money to invest.

AJ Bell carried out a survey this month with findings based on 146 responses from adviser users of the AJ Bell platform.

In its consultation response, AJ Bell raised a number of concerns about the proposals. These include the likelihood that the transactional nature of core advice may lead to large numbers of orphan clients, as well as fears that consumers may struggle to differentiate “core” from “holistic” advice, and therefore fail to recognise when they need full holistic advice to meet their needs.

AJ Bell is instead calling on the FCA to set out clearly its plans for the review of the boundary between advice and guidance.

The investment platform suggested this review should focus on addressing factors which unnecessarily increase the regulatory burden on advisers, raising the cost of giving advice and preventing it being accessed by more people, as well as enabling the delivery of more help and support to non-advised customers through guidance.

Head of retirement policy at AJ Bell, Tom Selby, described the FCA as “laudable” for its aim of encouraging over four million people who might have excess cash to invest money for the long-term, in line with their risk appetite and financial goals.

“This is particularly important during a period where high inflation threatens to erode the value of people’s savings,” Selby said.

“However, the regulator’s ‘core advice’ reform proposals are extremely limited in nature and, at worst, could risk poor consumer outcomes if firms are effectively encouraged to flog products rather than focus on providing ongoing advice. It is also far from clear advisers have the appetite to develop propositions that could sit within this proposed regime.

“A survey of advisers by AJ Bell reveals just 7% currently have plans to offer core advice to their customers, with capacity, fees and the risk associated with potential liabilities featuring prominently among firms’ concerns.

“Although limited reductions in qualification requirements, a reduced ‘fact find’ and narrower fund range may have a marginal impact on the cost of providing advice, we do not believe this will result in sufficiently lower advice costs to make serving those with ISA funds worth £20,000 or less attractive to the advice community.”

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