The Financial Conduct Authority (FCA) is finding it difficult to measure the true effects of the ‘advice gap' but will make it a priority over the coming year, according to chief executive Martin Wheatley.
Wheatley (pictured) said that the advice gap was the "single biggest difficulty" in the market that evolved post-Retail Distribution Review (RDR).
Speaking at a roundtable discussion on Monday, he said the regulator found it very hard to determine how exactly the gap was affecting people because getting the empirical data was difficult.
The FCA was essentially trying to measure "something consumers are not doing", he explained.
Wheatley said the regulator could not yet determine whether measures introduced by the RDR were effectively preventing people from saving or to what extent other factors, such as the economy and government policy, were also to blame.
However, he said the FCA considered the issue important and would spend the year looking into the true effects of the RDR on the advice market.
Wheatley said: "There are lots of people saying there is a gap but what we find very difficult is to work out [whether] that is translating into people not only being priced out of the market but being put in a position where they are not investing, they are not saving against all these sorts of advice that government, we and others would give today.
"An advice gap stems from all sorts of things. Some of them are tax and government policy, some of them are the state of the economy and whether you have free cash and some of them are [a result of] our rules.
"Part of the issue is trying to work out how much of what is happening in the market can we affect through the change of our rules.
"That is an important piece of work for us and it's one of the things that we'll spend certainly some time looking at over the next year."
Only last month a survey commissioned by the Association of Professional Financial Advisers (APFA) found that 60,000 clients were priced out of advice in the first year following RDR.
Director of long-term savings & pensions Nick Poyntz-Wright said the FCA had not yet seen a widespread move upmarket from IFAs but it could happen if the regulator did not do anything about it soon.
He added the FCA was also interested in new emerging models that could help service lower net-worth clients.
"If you've got lots of middle-income consumers who haven't got enough investable assets to really justify the cost of full advice then is there another route for them to save - and some, often smaller firms, are coming up with offerings we are interested in.
"We are interested to see how those are working, how those are communicating to customers, what it is they are getting and whether that is likely to produce good outcomes for customers," he said.
Wheatley said there was space in the market for new advice models, which he exptected to see emerge. "We expect to see a proliferation of different models, all of which are safe models that don't create detriment. But there is space for different models and we are still at the stage of seeing these developing."
The two main concerns the FCA flagged up with new, technology-driven models were the systemic nature of possible system flaws and the danger that consumers may think they have been advised when they have not.
The regulator is currently undertaking work to find out what roles non-advised and simplified advice could play to make the market more effective for all consumers, includig those priced out of full advice.
The 'discovery piece' is expected to conclude in the second quarter of this year.
Investment firm BlackRock also called for a simpler model of advice in December last year.
The firm said simplifying processes was the only way to bridge the advice gap while making it easier and cheaper to service lower-net worth clients.
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