AI and evolving regulation could make previously underserved customers profitable to serve. But unlocking this growth opportunity requires the right proposition design, differentiated pricing, and careful management of cannibalization risks.
For years, the “advice gap” has been viewed primarily as an access problem. In many markets, people need more help than a self-directed investing journey provides, but do not require - or cannot justify the cost of - comprehensive, ongoing financial advice.
That gap is increasingly a commercial opportunity. AI is changing the cost of delivering advice, while policymakers in several markets are examining how to make appropriately scoped advice more accessible. Together, these developments could create a viable middle ground between execution-only investing and full-service wealth management.
The question for financial institutions is not simply how to make advice cheaper. It is how to reach more customers profitably while managing the risk of cannibalizing existing full-service revenues.
A new middle is opening up
Consider a customer who wants to invest excess cash, get started with a long-term savings plan, or make a relatively straightforward retirement decision. A full advisory process – extensive fact-finding, broad financial planning, and ongoing reviews – may be disproportionate to that immediate need.
The scale of the gap is visible across markets. In the UK, for example, only around 4.6 million adults (9% of the adult population) received regulated financial advice during a period of 12 months. At the same time, the FCA identified approximately 7 million additional adults with £10,000 or more in cash savings who held no investment products and had not received regulated advice, highlighting a substantial opportunity to provide more accessible investment guidance. A 2026 study by the US-based TIAA Institute similarly suggests that many people without an advisor consider their financial needs too simple or their assets too modest to seek professional advice.
For providers, the challenge is economic: much of the cost of traditional advice is fixed. More focused, digitally enabled propositions could make customers with smaller portfolios or less complex needs commercially viable to serve, creating an entry point for longer-term customer relationships.
Different regulatory paths, a shared ambition
Regulators across markets are exploring ways to make financial advice more accessible. In the UK, the Financial Conduct Authority has proposed more proportionate suitability requirements for customers with straightforward needs. In the EU, policymakers and regulators are working to simplify aspects of the retail investment journey, while Australia is progressing reforms to enable more accessible and targeted financial advice.
Although these initiatives differ in scope and implementation timelines, the direction is similar: enabling financial institutions to serve customers with simpler needs more efficiently, while maintaining appropriate consumer protections.
AI improves the economics, but human judgment remains essential
AI can help transcribe meetings, pre-populate fact-finding, draft suitability documentation, and support compliance or quality checks, subject to appropriate safeguards and human oversight. The advisor remains accountable, but less time needs to be spent on repetitive work.
There is significant room for improvement. In Avaloq's 2026 research, based on 480 wealth professionals and 4,256 investors across 21 markets, 54% of wealth professionals cited administrative workload as a barrier to focusing on clients. Removing friction could both reduce cost to serve and increase advisor capacity.
At the same time, AI is changing how customers interact with financial advice. A 2026 HSBC survey of around 10,000 affluent and high-net-worth investors across 10 markets found that 73% use AI for finance and investment, while 50% prefer a hybrid approach combining AI with human advice.
While AI has largely supported human advisors so far, agentic AI could increasingly take on parts of the advisory role itself – from monitoring portfolios to identifying customer needs and generating personalized recommendations. Emerging providers such as PortfolioPilot in the US and Decade in Brazil already illustrate elements of this shift, although neither offers fully autonomous advice. By reducing reliance on human advisor capacity, AI-driven propositions could make financial advice significantly more scalable and challenge traditional providers' ownership of customer relationships.
Capturing this opportunity requires more than adding AI tools to existing processes. Firms need to redesign advice journeys, integrate appropriate human oversight and develop propositions that translate technological capabilities into meaningful customer value.
The opportunity depends on where a firm starts
For wealth managers and advice networks, the opportunity is to reach customers below today’s economic thresholds and begin the relationship earlier. As wealth and financial needs become more complex, those customers may move into broader, higher-value advice.
For banks, the opportunity is often within the existing customer base. Someone holding significant cash may not need comprehensive wealth management but could benefit from focused support to understand suitable investment options. The ambition is to deepen a banking relationship, not force every customer into a full-service wealth proposition.
Both models share the same challenge: serving new customers without undermining the value of existing services.
The cannibalization trap
If a lower-priced, mostly digital proposition looks interchangeable with comprehensive advice, why would an existing client continue paying a premium?
Attracting previously underserved customers is the main growth opportunity. However, some existing clients trading down may also make commercial sense if it improves retention or enables them to be served at lower cost.
The real risk emerges when customers move to lower-priced propositions without a corresponding reduction in service costs. Revenues decline while clients continue to demand much of the same support behind the scenes, putting profitability under pressure.
This makes clear proposition boundaries – or "fences" – essential. Customers need to understand which needs each service covers, what support is included, and when more comprehensive advice is appropriate. Firms, in turn, must ensure that the economics of each proposition support profitable growth.
Design a ladder of advice, not just a cheaper product
Winning propositions begin with four design decisions:
- Who it is for. Define customer segments based on financial needs, complexity, life stage, assets, and willingness to pay - not portfolio size alone.
- What it covers. Specify the decisions, product range, and service level included in focused advice, and which needs require a more comprehensive proposition.
- How it is delivered. Combine efficient digital journeys with human support where it adds value or is required, while ensuring different service levels translate into genuinely different costs to serve.
- How it is priced. Align pricing with the value delivered and customers' willingness to pay. Different charging models may be appropriate, but each proposition must balance customer attractiveness, profitability, and the risk of cannibalization.
Together, these decisions should be grounded in customers' willingness to pay and the economics of each service tier. AI-led propositions can already provide low-cost guidance on relatively straightforward needs, such as portfolio risk-return optimization, fee reduction, or tax-efficient investment options. More complex decisions, however, still require validation by tax, legal, or investment specialists. Comprehensive advice must justify its premium through this expertise and broader financial planning, while lighter propositions must remain profitable at lower price points. The objective is to maximize profitable growth across the entire advice portfolio, rather than simply making advice cheaper.
The next competitive advantage is the proposition
Not every firm needs to offer every level of advice. Smaller specialists may benefit from staying focused; larger providers may be better positioned to create a ladder of services spanning different customer needs and price points.
The central opportunity is not to discount comprehensive advice. It is to make the right level of advice viable for more people. Firms that combine differentiated propositions, efficient delivery, and thoughtful pricing can expand their addressable market without giving away the value of the business they already have.
Get in touch with our experts to discuss what this could mean for your business.
