Almost 15 million people no longer have access to professional financial advice following Government reforms last year, according to an industry expert who is drawing up a report for MPs.
Garry Heath, for 10 years leader of the Association of IFAs, says one-quarter of advisers with 3.5 million clients have left the industry, another three million people have an adviser who can no longer service them properly under the new regime, and banks have largely withdrawn their financial advisers serving six million customers.
Heath claims the "orphan client" population may swell to 20 million as the effects work through last year's retail distribution review (RDR), which outlawed commissions and ushered in fee-based advice.
Loading article content
His warning comes as the industry grapples with the fallout from the bombshell Budget, when the Chancellor promised free guidance for all at age 55 to help them understand the options for cashing in pensions.
The Government's recent assurance that the guidance will be provided by the Money Advice Service and the Pensions Advisory Service has been widely welcomed - but with cautions.
Neil Lovatt, product director at Scottish Friendly, said: " It's a solution that cannot possibly cope with the level of demand that should be placed upon it, which leads me to believe that it won't be implemented properly."
Karen Barrett at unbiased.co.uk, the IFA directory website, said: "It is critical for everyone to be clear on the difference between guidance and advice. Guidance is a welcome starting point and a step in the right direction but it doesn't cover a recommended action based on consumers' individual circumstances. This can only be achieved through advice."
Nigel Green, the founder of expat advisers deVere Group, warned: "It will be of the 'one-size-fits-all' variety. It will be dangerously generic because to do it any other way is prohibitively costly for the Government."
For those not nearing retirement, the options do appear limited. More than 25% of savers and investors looking for financial advice were finding it difficult or very difficult to find help despite having an average £240 a month to save or invest, according to research from Yorkshire Building Society at the end of 2013.
It found 47% of people were deterred from investing in equity-based products due to a lack of knowledge.
Building societies the Nationwide Yorkshire and Skipton still offer a high-street adviser, though at a price.
An IFA might offer a free first meeting then charge a minimum £150 an hour. Some IFAs are devising partially web-based interactive services, others are working on streamlining their processes.
Now there is online investment manager Nutmeg, which tailors portfolios to clients' goals, charges 0.3% to 1% depending on investment size, and offers an interface showing how your money is performing at any time.
Andy Cumming, director at Close Brothers Asset Management in Edinburgh, says: "People do seem to have more choice. The RDR has been a force for good, consumers can now choose the service levels they want from firms, and firms like ourselves have to be much more professional.
"There are no hidden charges, it is all out there."
David Thomson, director at VWM Wealth in Glasgow, observes that the RDR reforms have put an end to the traditional "hospitality" given by product providers to IFAs which might have been seen as inducements. "The regulator says things like taking you to the Ryder Cup for no business reason are banned. What is acceptable is a lunch to meet a fund manager, perhaps at Turnberry."
He says the new era means "people can be sure we are working for the benefit of the client". He says: "Arguably servicing lower value clients is now becoming a more profitable and viable proposition. You can apply your process lower down, and use model portfolios from a platform."
But surveys continue to find a strong resistance to paying fees on the part of investors, with most being put off by an estimate of more than £150. And if IFAs can find model portfolios on platforms, so can the more confident investor, doing it for themselves.
Platforms such as AXA Self Investor, Fidelity, Tilney Bestinvest, Hargreaves Lansdown and Alliance Trust Savings offer varying levels of guidance, not intended as advice, on investment choices.
Mark Polson, founder of Edinburgh-based platform analysts the lang cat, says that when choosing a platform "things like front-end web user experience, investment choice, customer service, tools and calculators to help customers understand their investment risk profiles and exit charges are all important factors to consider alongside price". But lower administration fees could make a difference to your returns.
Thomson warns against leaving cash uninvested with these services. "There is a lot of smoke and mirrors on platform charges and they will give you a very low rate of interest."