The Financial Conduct Authority (FCA) had admitted concerns over the banks dropping out of advice due to the retail distribution review (RDR).
Chief executive Martin Wheatley said that the lack of availability of advice to the mass market was a concern while giving evidence to the Treasury Select Committee this morning.
Following a question from TSC member and Conservative MP Mark Garnier who asked if he was alarmed by the banks pulling out of advice, Wheatley said: ‘It is a concern. People who have... below £50,000 or £100,000 are not getting the same service that they were getting. That is a concern.'
Wheatley (pictured) said that the RDR has been a success in terms of introducing better transparency and the removal of product bias but there was an issue over the gap created by banks’ move to pull out of advice.
He questioned whether the banks had offered proper advice prior to the RDR and said the FCA understood that the mass market could not afford to pay for full advice.
‘You can question whether it [bank advice] was advice or if it was sales… most banks and advisers have worked out you can’t provide a fully advised service. Full advice service is five to six hours of work and that costs and therefore that [bank] model, we’re seeing less of it.’
Wheatley backed new web-based services to emerge and fill the advice gap and 'offer advice in a different form’, but conceded this evolution was still a work in progress.
He added that while some banks and insurers have shied away from advice completely others were still trying to form cost-effective advice propositions to the lower-end of the market.
'That part is honestly still in transition,' he said.
Barclays closed its advice arm in 2011, followed by HSBC closing its tied advice business in April 2012. Lloyds closed its mass market advice service in November 2012, while Santander cut its advice service in early 2013.
Most recently, AXA UK pulled out of face-to-face retail advice when it ended partnerships with Co-operative Banking Group and Clydesdale and Yorkshire Banks.
Last week, Garnier said he was 'keen' to carry out a follow-up review of the impact of the RDR, specifically focused on access to advice. The Treasury Select Committee has yet to decide whether such a review will go ahead.