Don’t abandon low-value clients: Lowes’ RDR plans
Lowes Financial Planning managing director says long-term benefit of smaller clients will pay off.
Every adviser firm will change shape in the build up to and wake of the Retail Distribution Review and, according to its managing director, Newcastle-based Lowes Financial Management is no exception.
Despite the bearish rhetoric coming out of some IFA firms on their post-RDR plans, Lowes Financial Management will not let go of its smaller-value clients in the post-RDR world, according to Ian Lowes, whose father founded the firm.
It will also focus on fleshing out a new offering for clients that wish to go direct - something that is becoming increasingly popular among advisers - in the form of its execution-only structured products wrap, SPwrap.com.
Mr Lowes believes SPwrap, along with his other online services in this area, will allow other advisers to consider diversifying their structured products offering and there are plans to open these portals up to rival firms.
It isn’t economical for us to process the business for a £10,000 investment, but the client may subsequently invest more or refer a new client
Company structure
As well as the traditional IFA business, Lowes Financial planning has also developed a structured products wrap and a series of educational seminars.
Mr Lowes says: “We recognised a demand in our own company and thought instead of doing something niche for ourselves let’s do something for the industry. So rather than keep it to ourselves we are seeing if we can push it out to the market.”
The company itself has a remarkable structure: for every client-facing member of staff there are about five people working behind the scenes, taking care of the time-consuming admin and research work.
“Your best client facing people shouldn’t be bogged down with IT etc. While there are 12 client facing advisers the company has 60 people in total.
“We are running a three-to-one back office and this allows people to spend days seeing clients not doing administration and doing research. They have also had time to get qualified.
In the run-up to the Retail Distribution Review, Mr Lowes says his firm has maintained its focus on getting its advisers ahead of the qualification game.
“We have always had a focus on education and expanding knowledge. It isn’t until you actually sit down and start doing qualifications that you establish there actually a lot of things you didn’t know you didn’t know. I sound like Donald Rumsfeld.”
Most Lowes advisers are qualified beyond QC level four and many are finishing off exams to become chartered.
Cross-subsidy
When the transition was made to adviser charging in the regulator’s plans Mr Lowes said the firm stopped and thought about what the purpose of the change might be.
Having done this Mr Lowes said the firm looked at its own model, which relies on cross-subsidy from higher-value clients, and made the decision that it would seek to retain lower-value clients post-RDR despite the potential for them to become less economical when they can no longer earn ongoing trail without providing additional review services.