UK retail advice sector faces pivotal shift amid regulatory reforms and hybrid models

The UK retail advice market is at an inflection point. According to the original report by Patrick Murphy in Money Marketing, regulatory change , most visibly the Consumer Duty and the FCA’s Advice–Guidance Boundary Review (AGBR) , is reshaping what firms may offer and to whom. Alongside government proposals to permit “targeted support” for pensions, these shifts create an opening to reconfigure how help is delivered to millions who currently receive little or no regulated advice.

The scale of the challenge is stark. FCA survey data shows just 8.6% of adults received regulated financial advice in the previous 12 months, while only around 41% reported any form of support on investments, pensions or retirement planning. Industry figures paint a similar picture of structural strain: retail advice revenues expanded to roughly £6 billion in 2024 even as the number of retail investment adviser posts fell to about 37,441, and market-size estimates put the sector at about £7.0 billion with continued consolidation among firms. Together these data underline a widening gap between demand for client-centred help and the workforce available to deliver it.

Murphy argues that the sector has long misallocated effort , concentrating resources on documentation, suitability and compliance at the expense of the behavioural and emotional work that clients value most. He writes that decades of research from Vanguard, Morningstar, Dimensional and others show clients prize “behavioural stability, clarity and confidence” rather than technical product selection. Echoing that theme, he warns that neither pure automation nor a purely human model can scale: “Consumers didn’t want algorithmic product selection; they wanted human reassurance,” he wrote in Money Marketing.

Targeted support (TS), as envisaged by the AGBR and government proposals, offers a middle way. The initiative would allow authorised firms to provide structured, contextualised suggestions to defined cohorts , for example people facing retirement, redundancy, inheritance or family formation , without crossing into personalised regulated advice. Proponents say TS could unlock a new delivery channel that is more affordable and accessible while remaining consistent with consumer protection aims.

But implementation is critical. The original report emphasises the risk of “creeping advice” and sets out the governance requirements necessary to manage it: precise cohort segmentation, system-embedded boundary triggers, audited scripts, clear escalation routes and robust management information to evidence consumer understanding and outcomes. These measures reflect the FCA’s broader focus on outcomes under the Consumer Duty: firms will increasingly need to show not just completed processes but that customers understood information and made better decisions as a result.

That requirement points naturally towards hybrid models that combine automation and human judgement. Automation can make repeatable, auditable tasks , data capture, segmentation, nudges and record-keeping , more efficient and scalable, while human advisers are reserved for coaching, complex judgement and emotional reassurance. Hybrid delivery also aligns with the FCA’s expectations for measurable outcomes: digital tools can produce management information such as interaction paths, comprehension testing and behavioural follow-through that help firms evidence improvements in consumer decisions.

Hybrid models, however, introduce new responsibilities. Algorithms and decision-support tools will require ongoing monitoring for bias and effectiveness. Data governance must be strengthened; platform resilience must meet operational standards; and behavioural interventions should be ethically designed and tested. The industry will need auditable records that show when, why and how consumers received targeted support so outcomes can be judged and regulatory obligations met.

There is also an economic question. Revenues across the sector can mask pressures beneath the surface: while aggregate income grew, adviser headcount declined and average adviser age remains high, pushing up cost-to-serve. IBISWorld and industry reporting indicate the market is consolidating, with fewer firms and rising per-client costs. That context makes the efficiency gains promised by TS and automation attractive , provided they are deployed to enhance, rather than dilute, meaningful human contact.

If executed thoughtfully, Murphy and regulators suggest, targeted support and hybrid advice could narrow the advice gap by making the elements clients value , clarity, confidence and behavioural stability , available at scale. If implemented poorly, they risk inconsistent service, regulatory breaches and a new class of consumer harm.

The choice for the profession is therefore strategic as much as technical. The regulatory changes set out the why and the what: the Consumer Duty defines expectations of outcomes, and the AGBR sketches the permissible shape of non-advised support. The how will be determined by firms’ willingness to redesign journeys around behavioural science, tightly governed automation and clear human intervention points.

The industry has long talked about the advice gap. Targeted support and hybrid advice now give firms practical tools to begin closing it , but success will depend on disciplined design, rigorous governance and a clear focus on the consumer outcomes the reforms are intended to improve.

Patrick Murphy is director of Sustain Momentum; his original commentary appeared in Money Marketing.