Cofunds, the UK’s biggest fund platform for financial advisers, is enabling some investors to manage their own portfolios without advice for the first time in a bid to retain lower-net-worth clients.
Roughly 500 advisers who use the platform have had self-directed services created by Cofunds to enable some of their clients to run their own portfolios.
The move is a significant departure for the intermediary platform, although it has no current plans to break into the direct-to-consumer market and will offer the service only as a solution for former advised clients who want to stay invested.
The change comes as the UK regulators’ RDR ban on commission is causing many clients to become ‘orphaned’ as the scale of their assets is insufficient to justify the fees for servicing them with advice.
Cofunds also plans to roll out enhanced “tools and options” for advisers this year, according to head of marketing Stephen Wynne-Jones.
“A trend we’ve noticed is that some advisers are wanting to offload clients they feel won’t pay for advice or have modest holdings that make them not economically viable to service,” he said.
“We’re suggesting to these advisers that, rather than remove them from their client books, they consider offering a lighter-touch self-directed proposition.
“After all, it may be that these clients inherit money some time, or could be encouraged to max-out their Isa limits - particularly relevant with the major overhaul of Isas coming in July - or generally may seek advice following some major life event.
“In effect they’d be nurturing what could become the high-net-worth clients of the future. Platforms can help advisers provide this service.”
Mr Wynne-Jones said the self-direct systems being developed by Cofunds would also prove useful in the event of adviser firms going bust.
The change comes after some advisers had complained that Cofunds, unlike other platforms which also have direct-to-consumer portals, was unable to deal with clients directly even if the adviser wanted to disengage them. Cofunds’ terms previously stated that if an adviser wants to relinquish a client another adviser had to be found for them.
Iain Wishart, chartered financial planner at Wishart Wealth Management, backed the initiative. “What Cofunds is doing is a good thing as many clients will fall down between the ‘advice gap’ where it’s simply not profitable for IFAs to service them,” he said.
However, Mr Wishart said his business would not be offering clients the option to go self-directed on Cofunds as his firm’s typical portfolio size started at £200,000, which is sufficient to justify advice fees.
“We do not see it as our job to advise everybody out there – or to put in place the facility to do that,” he added.
Nick Bamford, executive director at Informed Choice, said his firm preferred to charge clients for a full advice service, adding he had experienced “no difficulties” in terms of re-engaging with clients they had previously decided not to advise at that point in time.
