CompaniesMar 14 2013

Pru urges three-year reviews for low-value clients

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Advisers are looking for ways to streamline their business to cater for low value clients and should consider spreading the advice cost over three years to help make it more affordable, Prudential has said.

In an interview with FTAdviser, Paul Harrison, head of business consultancy at Prudential, highlighted that finding a business model that works for simple low value investments is a challenge.

He said simpler clients wanting, for example, advice on Isa investments may not be willing to pay a standard 3 per cent charge but that moving to a model of three-yearly reviews and using online services to maintain contact in between could allow advisers to profitably reduce costs.

Mr Harrison suggested a ‘one, two, three service’ where would see the client face-to-face every three years and use technology such as Skype in the other years. High-net-worth clients could receive a more bespoke service, Mr Harrison added.

He said: “Advisers are beginning to look at different ways to provide a service to an existing low value client as they want to keep the client but need to look at what kind of service the client needs.

“On years one and two might a review on Skype: the valuation gets sent to the client and then a phone call to follow up. Then, in year three, a full service review.

“The total cost for a full service review could be £750 so you could charge £250 a year to meet that cost in year three. This would be a more ‘arms length proposition’.

“If the client wants to come and see you, you would tell them this may cost and show them the fee menu. It may be that the first hour is free and if it is complex then it will be a complex cost, whereas if it simple, the cost would reflect that.”