Advisers have formally asked small clients to leave their practice as the investable assets are so low that it would not be worth their while to stay with the adviser, new research has revealed.
Research from Schroders showed that 18 per cent of advisers have formally asked small clients to leave their practice and 69 per cent of those asked to leave had below £50,000 in investable assets.
A survey of 644 advisers found that 49 per cent have segmented their client base by size or resource and a further 18 per cent plan to, while 86 per cent offer different levels of service based on size or revenue.
Robin Stoakley, managing director of UK intermediary, told FTAdviser that he was not surprised by the results, stating that prior to the Retail Distribution Review large customers were effectively subsidising smaller clients, and now those with more assets are just getting a better deal.
“I suspect those being asked to leave aren’t part of any wholesale letter campaign, but rather will have the conversation over increased charging at their annual review and with the size of their pot, it won’t be worth their while staying with the adviser.”
Only 40 per cent of advisers offered execution-only or basic advice services, with the 88 per cent of those that don’t, not intending to in the future.
Mr Stoakley commented that execution-only services could rise in the future. “There has always been an advice gap, but it appears to be getting bigger. The timing is particularly bad, given from next April the need for affordable advice will be greater than ever.
“It’s just that the RDR force IFAs to look at where their money comes from and the trend is now definitely for advisers moving up client scales.”
The study also showed that portfolio outsourcing continues to grow, with more advisers outsourcing more of their assets.
Only 56 per cent stated they do not outsource, but of those that do, 14 per cent outsource more than half of their assets and 68 per cent have increased the proportion of assets they outsource.
In terms of where assets are outsourced to, Old Mutual Wealth was the most popular primary platform with 20 per cent of adviser money, followed by Standard Life and FundsNetwork with 14 per cent, Cofunds on 12 per cent, Axa on 7 per cent and Transact on 5 per cent.
In terms of secondary platforms, Fundsnetwork came top with 18 per cent, followed y Old Mutual on 15 per cent, Cofunds on 14 per cent, Aviva at 12 per cent, Axa at 6 per cent and Standard Life on 4 per cent.
Amongst the other findings, the proportion of advisers who charge clients a percentage of assets under management was up, but combination arrangements remain the most popular form of client charging, and fee levels appear to be gradually falling.
peter.walker@ft.com
