The average investable assets required to engage an adviser has risen by nearly £20,000 - from £47,610 to £66,702 - since the Retail Distribution Review took effect at the beginning of 2013, according to new research from Natixis Global Asset Management.
A survey conducted online in June and July with 300 financial advisers in the UK found that 70 per cent reckon the RDR has made it more difficult to provide financial advice to the mass market, while 73 per cent said the regulation had limited investors’ ability to seek financial advice.
While ‘robo-advice’ and more simplified, automated systems have been put forward as one solution to the growing advice gap, 83 per cent of those surveyed predicted firms employing such methods would experience redemptions during difficult periods due to their inability to give personalised support.
Aroun 61 per cent do not view the new automated firms as a threat to their businesses, in fact, 59 per cent see it as an opportunity to better communicate their value advice to clients.
One of the reasons the advice gap remains a major concern in the market is that 71 per cent said establishing relationships with the next generation of investors was crucial to the long-term success of their businesses.
Just over half said advisers with a younger clientele will grow faster over the long-term than those with an older client base.
It is, however, these same younger investors who have typically been overlooked because of the advice gap, according to the research.
Currently, an average of just 9 per cent of advisers’ clients are aged under 35, “and having been overlooked at this stage of their lives may feel less inclined to take professional advice later on when they have built up sufficient sums”.
The Natixis study also looked into asset allocation and risk tolerance, finding that 54 per cent of respondents said the level of investment risk their clients were willing to take was no longer increasing.
The same amount of financial advisers also said that their clients were only willing to take minimal investment risk, even if it meant sacrificing returns, while nearly three quarters (73 per cent) said their clients were conflicted between making returns and preserving their capital.
Chris Jackson, deputy chief executive at the firm, commented that by making emotional decisions, investors are most almost always missing out on market return. “Therefore it is crucial to keep long-term goals in mind; far better to keep their eyes on the prize and stay the course.
“Given the extent to which these market issues have been discussed in the media, it is worrying but no surprise investors might feel compelled to sell up and look for a safe haven.”
peter.walker@ft.com
