The changing advisory landscape has left a tranche of smaller investors stranded without easy access to conventional sources of advice.
In January 2013, the powers that be decreed that all financial advisers must charge a fee for their services, rather than collecting commission.
Previously clients would never really see how much their adviser was getting paid because the product providers took care of remuneration (from investors' money), but since that date they have had to bear the costs themselves.
Advisers who charge a percentage are having to turn lower-value clients away, and advisers who charge an absolute amount are simply too expensive to make advice worthwhile for many people with smaller sums.
restricting advice services
Previously people could get 'tied' advice - restricted to products from a limited range of providers - at their local bank branch, but over the past few years many banks have been withdrawing their advice offerings, in part for the reasons outlined above: they are just not financially feasible anymore.
The big advisory firms are tending to take a similar path. For example, national advice firm Chase de Vere is no longer taking on any new clients with less than £50,000 to invest, and giving existing clients with less than that sum access only to telephone guidance services, charging extra for personal recommendations.
Another firm, Candid Financial Advice, claims to have set the cat among the pigeons with the launch of a 'low-cost' full advice offering, but even this is only really worthwhile in terms of value for money for people with at least £100,000 to invest.
Skipton Building Society offers restricted advice through its subsidiary Skipton Financial Services. It describes itself as 'one of the only, if not the only' high street organisation offering advice. However, it is relatively quite expensive, charging 4.5 per cent on portfolios of up to £150,000 and an ongoing fee of 0.75 per cent.
Moreover, its charges are not listed on its website, and are generally only presented to a client after an initial face-to-face meeting.
People who are either unwilling or unable to pay for advice fall into what is called the 'advice gap'. The advice gap's size - and even its existence - is a subject of ongoing debate.
Accountancy firm Deloitte estimates there could be as many as 5.5 million people who have decided to stop using a financial adviser or lost access to one, while research by fledgling online advice company Wealth Horizon suggests there could be more than 11 million people who manage their own finances, at least partly because they cannot or will not pay for an adviser.
Wealth Horizon found that 39 per cent of just over 1,000 do-it-yourself investors surveyed said they had decided to go it alone because 'financial advisers are too expensive'.
Justin Modray, founder of Candid Financial Advice, says: 'I think there are likely several million individuals who could benefit from financial advice on thousands or tens of thousands of pounds, but for whom bespoke financial advice is not cost-effective.'
However, the Financial Conduct Authority (FCA) has remained reluctant to admit that a gap exists, instead claiming in its own research that although a small number of people moved away from advised channels, a larger number have shifted into them.
There are limited options for investors who find themselves cut off from advice, be it through their own choice or otherwise.
Some advice firms are expanding their offerings to include more streamlined, cost-effective services. This might involve segregating clients into several levels of service, with the richer ones getting the full-fat advice offering, including more meetings and more in-depth reports, while the lower echelons might be offered a less labour-intensive alternative.
For example, the advisory stockbroker and wealth manager Killik, while continuing to offer its managed portfolio, multi-asset and discretionary broking services for those with at least £100,000 to invest, is also looking to reach out to smaller clients.
It now provides a fund-based multi-manager service with a choice of six investment approaches, a minimum investment of just £7,000 and an annual management charge of 1.2 per cent.
Alternatively, investors with £200 a month to spare can sign up to the monthly savings plan, where their contributions are ploughed into one of three investment strategies. In both cases the portfolios are monitored on an ongoing basis.
investment research tools
Alternatively, investment research and fund ideas are available on the websites of most online discount brokers and fund platforms. But for people who really don't have any idea where to start, moving to an execution-only platform could seem a daunting task.
Some online DIY services include 'guidance', a weird grey area that is not technically advice - in that it offers no personalised recommendation - but still points investors in the right direction.
Fidelity Personal Investing, for example, offers a rich guidance service including the 'others like you' tool, where you enter your age and how much you have invested, and are provided with statistics about what others in those circumstances have done with their money.
This may seem pretty personal, but technically it is not a recommendation that you should invest in certain funds. Rather, it is simply showing you what others are doing, so you risk merely following the herd - which brings its own risks as demand pushes prices up.
Such solutions are fine up to a point, but what if you need true personalised advice, rather than something that does as much as it can without actually crossing that line?
One new firm looking to suture the advice gap is Wealth Horizon, founded by ex-Ashcourt Rowan chief executive Chris Williams. Launched in August, Wealth Horizon offers cost-effective online advice to anyone with as little as £1,000 to invest. It claims to make advice available without clients actually having to speak to an adviser - something some will no doubt miss, but a feature that allows costs to be kept low.
With the Wealth Horizon service, clients can at first get an anonymous portfolio recommendation based on their individual circumstances, completely for free and with no commitment. If after that they want to go ahead and invest, they will pay an annual fee of 0.75 per cent plus any underlying investment costs, and an initial joining fee of another 0.25 per cent.
Free advice service
Another, slightly older online service, Money On Toast, has a similar free recommendation system. It also offers a discretionary portfolio management service, all for 0.7 per cent a year including a 0.35 per cent ongoing advice fee and a 0.35 per cent discretionary management charge.
So what's to keep clients from using a free service to get a certain recommended portfolio, then taking their money to a - potentially less expensive - execution-only platform and building it there according to the free recommendations?
Williams at Wealth Horizon says: 'The free portfolio comprises what could be suitable for a customer based on the answers on the initial questionnaire. While a client could use this for execution-only purposes, we wouldn't recommend doing so as the portfolio has not yet been vetted for overall suitability: this comes later in the process. Also, this approach would mean that the customer would not benefit from any of the services we offer - whether this is ongoing advice or rebalancing portfolios.'
Money on Toast founder and managing partner Charlie Nicholls adds that using an execution-only service might not actually be much cheaper either, and would deprive the investor of the discretionary management service.
Williams points out that paying around 1 per cent per year compares favourably to a typical adviser's ongoing charge, which can range from 1.75 to 2.5 per cent.
But the choice of new products launched to fill the gap remains pretty limited. According to Gareth Evans, head of corporate affairs at insurance giant Royal London Group, one of the challenges of launching a simplified advice service is the potentially increased vulnerability to claims and complaints.
Liability is a four-letter word in advice circles, and advisers do not want to be burdened with complaints or forced to pay compensation for mis-selling.
Evans says: 'Even if you explained that you were only going to advise on the purchase of an Isa, for example, there are other things that might be more pressing in a client's financial planning requirements.
'They might have dependants or debts that weren't covered by appropriate protection. If they then died and left their dependants unprotected, you can see there would be comeback on the adviser for not identifying the need for protection.'
Indeed, the FCA found in a review of simplified advice services that many firms felt the same way: 'Firms are concerned that automated advice processes... could result in systemic mis-selling if parts of the process produce unintended, unsuitable recommendations for certain groups of customers.
'This led many firms to include significant compliance and mis-selling liability costs within their business plans, limiting their commercial viability.'
However, Nicholls argues that an automated service might actually be more reliable and consistent than a human sales force. 'We have ultimate control. Our system works on an entire audit trail. A lot of mis-selling problems [have arisen when the] adviser didn't check or record everything properly.'
What is the outlook? Although it appears that full, face-to-face independent advice may be a thing of the past unless you have at least £100,000 to invest, smaller investors won't be left entirely out in the cold thanks to the continuing innovations enabled by technology.