The dilemma facing the UK’s Financial Services Authority (FSA) is that in an ideal world it would simply outlaw any payments and pricing models that have the potential to distort the advice solutions financial planners offer clients.

However the reality of this black and white positioning is that such a move has the potential to set the industry back many years by locking a few million UK consumers out of the market in the process.

A ceasing problem of the industry in the UK, and elsewhere, is that many people will simply forego advice if the current structure of institutions subsidising the cost of delivering advice ends.

This aside, let’s deal with what’s real now.

In law, accessing legal services is very expensive at the best of times, however a mechanism exists in society whereby Legal Aid is often made available to those in desperate need of legal advice but whom lack the ability to pay for it.

Meanwhile, the same can be said in the UK when seeking medical assistance. Through the NHS people can receive basic medical support and services, even if they lack the ability to pay for it.

The above two analogies may raise a few feathers as financial advice may not be deemed as critical as some medical or legal needs, yet even the FSA’s delayed ruling on how to deal with UK platforms could raise the price of advice in one swoop when it announces its decision belatedly in October.

Unbundling of fees (more transparency to those not familiar with the matter) in the platform market is a sensitive issue as the major providers won a temporary reprieve in late August as the FSA was set to make a ruling on the subject.

The actual administration fee charged by some of the major investment supermarkets is kept artificially low by generating yield from other areas of the business, for example the cash accounts of clients where money is housed until advisers allocate to other assets, and therein making advice seem more affordable (or at least the administration of it).

However if the admin costs at the bottom end of the market now rise and the situation is compounded by investors being required to front up cash themselves for advice as part of the transition to fee for service, then the only winners are likely to be the growing pocket of investment wraps in the market.

However this will only be in a relative sense as the three main investment supermarkets and the market as a whole lose a significant amount of business at the bottom end of the advice client spectrum.

Some advisers are trying to swim against this inevitable shift in the industry by seeking out more affluent customers at the expense of lower balance clients.

This will partly achieve the aim of making financial advice a true profession, however at the expense of being a service that is only available to those with the financial means to pay for advice.

Sadly these aren’t necessarily the people most in need of dialling the financial equivalent of the emergency helpline.

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