Adviser: Low-cost middle-ground services key to RDR survival
Post-2012 there will still be too many advice firms clamouring for business from too few high net worth clients.
Survival for many advice firms post-2012 will depend on their ability to adapt a profitable service proposition to meet the needs of an increasingly financially aware demographic with modest wealth that do not need or want a full advice service, according to one experienced intermediary.
Phillip Dodd, who has worked in financial services for 35 years and is a chartered financial planner, said the reality is that even if pessimistic predictions of a decimation of the advisory sector come to pass, there will still be too many firms vying for business from too few high net worth clients.
Defining high net worth as being clients with more than £500,000 in investable assets, Mr Dodds wrote in a blog post on his Money Guidance website that there were only 550,000 such individuals in the UK and that this would not be enough to sustain the whole sector.
Highlighting the clamour to offer products at either end of the advice spectrum, with full-service regulated advice at one end and execution-only at the other, Mr Dodd said the key to survival for many will rest on being able to develop a service for “those clients in the crowded heartland who want a service approximating to something in between”.
He said: “These people have already let their feelings be known – if Deloitte, Legal & General and YouGov surveys are to be believed – they will want to do as much as they can themselves and call on fee-based expertise only when they feel out of their depth.
“I cannot accept the argument that seems to be gaining more currency at the moment – that being to jettison unprofitable clients and to focus exclusively on those who add most value to the business.
“Could it be that they are unprofitable because of the way that the advisory business is currently configured?”
Mr Dodd highlighted a recent survey by Prudential, which found that one quarter of customers would be interested in an online or telephone service in return for a fee reduction of at least 50 per cent, while close to 40 per cent would complete their own fact finds online to reduce costs.
He said: “Given that the marginal cost of anything digital is currently falling by 50 per cent per annum, it should not be beyond the wit of good advisory firms to listen to what clients now want... and to create a number of profitable service propositions to meet these revised demands.”
Money Guidance offers a range of free tools to help non-advised investors to manage their finances, including basic asset allocation models broken down into seven different portfolios based on how an individual scores on the Finametrica risk scale.
The site says it will also soon provide “regulated, low-cost advice... involving a flat fee of no more than £100 + vat per annum”, and will offer users “access to “wraps/platforms with no adviser premium payable”.