Financial advisers have not turned their backs on so-called ‘lower-value’ clients as a new study reveals close to half continue to service those with less than £50,000 to invest, though one in five admit that they are now doing so at a loss since the Retail Distribution Review.
In a survey of more than 1,200 advisers, Aviva found that almost half of respondents continue to serve clients with less than £50,000 to invest. However, 22 per cent currently serve them at a loss while another 22 per cent have yet to decide how to deal with them.
Almost one in five now require clients to have at least £50,000 as a minimum investible amount to provide pension and investment advice.
Andrew Beswick, intermediary director at Aviva, told FTAdviser the result does not necessarily point to ‘cross-subsidisation’ taking place in part because most adviser firms have capital in the bank that might be able to soak up some of the loss.
He added that advisers may be taking a longer view of client profitability and serving clients at a loss today in the hope they become profitable tomorrow, while others have simply not decided their course of action.
Overall the survey results were broadly positive over the effects of the implementation of the RDR.
For example, more than half (55 per cent) of advisers report no significant change in the number of active clients post-2012, with a further 28 per cent actually reporting an increase due to an influx of clients of IFAs that have left the industry and a swathe of new clients seeking advice.
Almost three quarters (72 per cent) of advisers say that their clients’ reaction to adviser charging has been broadly positive or neutral, up from 65 per cent in March 2013. Moreover, almost two thirds (62 per cent) claim not to have lost any clients as a result of adviser charging and a further 28 per cent report only a very small loss.
Independence remains dominant across the market, with 83 per cent assuming an independent model post-RDR. The number offering restricted advice has risen modestly since March but remains low, increasing from 10 per cent to 13 per cent.
Mr Beswick said: “There is a sense of emerging stability from our latest barometer findings. Advisers seem to be more optimistic about the reality of RDR compared to their predictions a year ago.
“Naturally some advisers have left the market, but this has presented those remaining in business with more opportunities.
“Obviously advisers still have their concerns and we’ve seen a shift in these over the last year, but they are still actively supporting the mass market and looking for new ways to boost revenues. Advisres are continuing to develop their propositions to customers and work on how they can advise them on a profitable basis.”
