Russell Anderson: Is now the perfect time for some financial spring cleaning?

It may not seem like it amid the wintry weather but spring is here and the days are definitely getting a little bit longer.

For many of us, it’s the ideal time to get rid of the old and clean out our wardrobes and cupboards.

It’s also a chance to spring clean your spending habits and think about longer-term investment plans.

However, for many other people, saving or investing for the long-term is way down their list of financial priorities.

Cost-of-living crunch taking its toll

The cost-of-living crisis is having a very real impact across the country, with lots of us having to prioritise essential living costs before we consider saving for the future.

This also means people may feel they’re not in a position to turn to an expert to help them make important financial decisions.

We call this the “advice gap” – and let’s be clear it’s a big old gap.

A massive 89% of the UK population have not paid for advice in any shape or form in the past two years.

Big day for us yesterday. We launched our Advice Gap report – full of consumer and adviser research findings. We need to find ways to improve consumer trust which remains a big barrier to people seeking advice.

Report free to download here. https://t.co/vjTpJEGSTt

— Mark Locke (@langcatlocke) May 12, 2023

This means there are many people who are potentially missing out on vital professional support for their long-term finances.

The Financial Conduct Authority (FCA), which regulates financial services companies, is aware of this issue.

It is currently looking very closely at ways to help solve the advice gap by widening access to expert financial support.

Last December the FCA issued a discussion paper on the advice guidance boundary.

This boundary is the line where financial advice which results in a personal recommendation based on your individual circumstances meets general guidance.

The latter refers to only general support you are given around financial decisions.

The FCA wants to make it easier for people who may not have sought advice in the past to get support with making financial decisions.

This should, in turn, help more people improve their finances and have a brighter financial future.

What can be done?

The regulator is currently focusing on three key areas:

1. Clarifying where guidance ends and advice begins, to make it much easier for everyone to know where they stand.
2. Allowing financial services firms to offer more targeted support to “people like you”. The idea here is that a financial planner could suggest options based on what would be appropriate for customers “like you”, as these have worked for similar people and circumstances in the past.
3. Simplifying rules for financial planners to give personal recommendations, so they can offer a cost-effective simplified service to more people.

I’ve seen first-hand the difference financial advice can make to people’s lives.”

The FCA is currently taking feedback from financial advice firms on the advice guidance boundary, so we still need to see if and how all of this will change things for people.

I’ve seen first-hand the difference financial advice can make to people’s lives.

These fresh ideas from the FCA are a really positive step towards helping more people get started on their long-term savings journey.

Russell Anderson is a financial planner at Aberdeen-based Aberdein Considine Wealth.