Are Banks Returning to the Advice Market? Or Just Dipping a Toe in Distribution?

Twelve years ago, bank bosses stepped away from the bancassurance market, labelling it a zero-sum game. Now, they’re back with fresh plans. So, what’s changed, and is it a good idea?

HSBC, Barclays, and Lloyds are all making a big push back into wealth management, with HSBC aiming to double its assets under management to ￡100bn and break into the top five wealth managers in the UK. While their re-entry signals confidence in the market, the focus remains on product sales rather than delivering true, holistic financial planning that could make a real difference to clients' lives.

A New Look, Same Old Approach?

Let’s get one thing straight: banks aren’t entering the market with a radical new approach. They’ve improved on compliance and conduct risk, no doubt, and the adoption of AI technology has slashed the costs of onboarding and service delivery. But is what they’re offering really “advice”? No, it’s product advice — or more accurately, distribution dressed up as guidance.

For clients with ￡75,000 to ￡250,000 to invest, this is an interesting move. Why would anyone pay for access to an auto-rebalancing, passive multi-asset fund when they could go directly to a platform with no initial charge? The market is flooded with low-cost, direct investment options. This move feels less like an answer to an “advice gap” and more like a play to tap into a commoditised product market.

The Rise of Deposit Margins

Another factor driving this resurgence is the comparable margins banks now enjoy on deposits versus investments. With deposit margins healthier than they’ve been in years, what’s the point in moving a client from a savings product to an investment product? It’s like shuffling money from one pot to another, with little added value for the client.

A Missed Opportunity for True Financial Planning

The real opportunity here lies not in simply distributing products, but in embracing a fee-based financial planning model aimed at the mass market. This type of service isn’t regulated as advice by the FCA, which could significantly reduce conduct risk for banks. By focusing on genuine financial planning rather than pushing products, banks could offer real value to the mass affluent market — those with investable assets in the ￡75,000 to ￡250,000 range who are currently underserved by traditional wealth managers.

I say this as someone who was at the helm of product strategy for HSBC, RBS Group, and Santander, and who chaired the BBA’s Bancassurance Steering Group during the implementation of the Retail Distribution Review (RDR). I’ve seen first-hand the pitfalls of relying on product sales dressed up as advice. What’s missing today is not a product gap, but a financial planning gap. And it’s a gap banks are uniquely positioned to fill — if they’re willing to rethink their approach.

The Real “Advice Gap” vs. “Distribution Gap”

We keep hearing about the “advice gap,” but what we actually have is a distribution gap. The industry is awash with products, but true financial advice — tailored, holistic planning — is in short supply. Banks stepping back into the market with their focus on product distribution isn’t going to solve this. Instead, it risks repeating the mistakes of the past.

Imagine a world where banks offer fee-based financial planning, unlinked to specific products. It’s scalable, reduces conduct risk, and meets a genuine need. More importantly, it could finally bridge the real gap — the financial planning gap — in a way that puts client interests first.

A Call for Change

The resurgence of banks in the so-called advice market may raise some eyebrows, but it doesn’t have to be a bad thing. With the right focus, banks could lead the way in delivering accessible, transparent, and value-driven financial planning services. It’s not about racking up ￡100bn in assets under management. It’s about serving clients where they are, meeting their real needs, and shifting away from the old zero-sum game of product sales.

It’s time to consider a new approach. The door is open for banks to rethink their role, reduce conduct risk, and deliver something truly meaningful to clients. If they do, it could be a game-changer — not just for the banks, but for everyone looking for real financial advice.

Let’s hope they step through it.

Q&A: Banks Returning to the Advice Market — What It Really Means

Q: Why are banks returning to financial advice after leaving it 12 years ago?

A: Banks are dipping their toes back into the advice market because the landscape has changed. Compliance issues have been cleaned up, conduct risk is better managed, and AI is helping reduce service costs. But let’s be clear: banks aren’t really offering advice in the holistic sense — they’re still focused on product distribution. They see an opportunity in the mass-affluent market (people with ￡75k to ￡250k in assets) who are currently underserved. However, it’s more about selling pre-packaged investment products rather than genuine, personalised financial planning.

Q: What’s the difference between product-advice and genuine financial planning?

A: Great question! Product-advice is essentially recommending investment products, like funds or portfolios, based on what the bank has on offer. It’s tied to selling something. Genuine financial planning, on the other hand, is all about understanding your unique situation, goals, and values. It’s holistic, unbiased, and focused on creating a plan that suits your life — not just selling a product. It helps you map out your financial future, considering all aspects of your wealth, including human capital, property, and lifestyle goals.

Q: Are banks a good choice for clients with ￡75,000 to ￡250,000 to invest?

A: It depends on what you’re looking for. If you want a quick, low-cost way to access a pre-set investment fund, banks may offer some decent options. However, many of these products are commoditised, meaning you could find similar investments directly on platforms without paying extra fees. If you want tailored, holistic advice that looks at the bigger picture — beyond just investments — then working with a fee-based financial planner might be a better fit.

Q: Why do you believe banks should focus on fee-based financial planning?

A: Fee-based financial planning is a game-changer. It’s not tied to specific products, so there’s no pressure to sell you something you don’t need. This approach prioritises your interests, giving you a comprehensive financial plan that aligns with your life goals. Plus, because it’s not considered a regulated advice activity by the FCA, it reduces conduct risk for the banks. It’s a win-win: clients get high-quality planning, and banks can offer a valuable service with less regulatory hassle.

Q: Isn’t there an “advice gap” that banks are trying to fill by coming back into the market?

A: The term “advice gap” is often thrown around, but it’s misleading. What we really have is a distribution gap and a financial planning gap. There are plenty of products available, but not enough true financial planning services that help people make the most of their money. Banks re-entering the market with a focus on product distribution won’t solve this problem. If they shifted towards fee-based, unbiased planning, they’d be addressing a genuine need and filling a gap that truly matters.

Q: How does AI fit into this resurgence of banks in financial services?

A: AI plays a big role in cutting costs for banks, particularly in onboarding clients and managing routine services. It helps streamline processes, making it easier and cheaper to serve more clients. However, while AI can help deliver products more efficiently, it can’t replace the human touch needed for real financial planning. Planning your financial future is about understanding your life, values, and aspirations — something that requires more than just an algorithm.

Q: Will banks pose a threat to traditional financial advisers and planners?

A: Not really. Most financial advisers and planners offer a level of independence and holistic advice that banks, tied to their own products, simply don’t match. The real opportunity for banks lies in filling the gap in the mass-affluent market with a focus on genuine financial planning. If banks can make this shift, they’d complement the work of independent advisers rather than compete directly.

Q: What’s your view on banks entering the advice market again?

A: It’s a mixed bag. On one hand, it’s positive to see banks recognising the need to engage with clients more actively. On the other hand, if their focus remains purely on product distribution, they risk repeating the mistakes of the past. What’s truly needed is a shift towards fee-based financial planning — something that prioritises client needs over product sales. If banks embrace this, they could make a meaningful impact and offer something truly valuable to the market.

Q: How does this move by banks impact clients seeking financial advice?

A: For clients, it offers another option, particularly if you’re in the ￡75,000 to ￡250,000 asset range and have struggled to find a good fit with traditional wealth managers. However, it’s important to understand what you’re getting. If you’re just looking for investment products, banks might be convenient. But if you want a holistic, tailored plan that takes your entire financial life into account, a fee-based financial planner might be the better choice.

Q: What should clients look for if they want real financial advice?

A: Look for a planner who offers holistic, fee-based services, not tied to specific products. Ask about their approach: do they start with understanding your life goals and values, or do they jump straight to selling an investment product? True financial planning is about building a roadmap for your life, not just picking funds. It’s about you, not about the bank’s bottom line.

These Q&As should help clarify the key points of the article, offering a straightforward, client-focused perspective while gently guiding readers towards understanding the differences between product sales and genuine financial planning.