If our system of advice can’t help with interest-only shortfalls then what is it for?

This blog has occasionally raised concerns that the post-RDR advice sector could become increasingly irrelevant in public debates as it retreats to advising Upper Middle Britain.

Is there now a chance it could become irrelevant for something that is much more than a debate but also a public advice challenge – the interest only mortgages shortfalls facing 1.3 million borrowers. It is certainly a significant litmus test.

Of course, the issue can be overblown. While there is not necessarily a need to panic, there is a need for advice. But any consideration of the various options – moving to repayment, creating a savings and investment plan, down-sizing – would be better done with financial advice than without.

However the dynamics of the market may not lend themselves to allowing advisers to do much about it. In a world with more flexible regulations, advisers might set up bespoke workshops to help people consider their options. With more flexible regulations, mutual funds or even structured product providers might even hold out their investment products as a means to build enough money to bridge the gap. But with the endowment crisis complete with ‘shortfalls’ that led to complaints about advisers, there is very little chance any investment firm would risk their reputation even if the regulations allowed.

That strikes the Money Debate as a little odd, because taking a little bit of stock market risk, or even, with a structured product, some counterparty risk, might point to a way out for some slightly braver borrowers. That is bad news for society and perhaps bad news for advisers too.  But the big challenge must be regulators. If our advice infrastructure can’t help with this issue then what is it and all the related rules and regulations for?

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