IFA: Sacrifice profit to serve low-value clients post-RDR

Advisers should consider taking a hit to short-term profits rather than cutting low-value clients loose after the Retail Distribution Review, the managing director of Lowes Financial Management has argued.

After the RDR, some advisers worry that fee-based systems will make lower-value clients not worth their time. Not only will this alienate a section of the UK client base but with the scrapping of commission could close off a source of adviser income.

In an interview with FTAdviser on his post-RDR plans to be published today (3 August), Ian Lowes, managing director of the Newcastle-based adviser firm, said that his company is bracing itself for profitability hit on some clients but is determined not to cut lower value customers loose.

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Mr Lowes said: “I don’t want to segment the client base to get rid of those people. We have looked after some of those people for decades and if you only have £30,000 in your portfolio it’s all you have got and I wasn’t going to be facing a situation where I was telling them the firm couldn’t provide a service anymore.”

He added that continuing to provide service to these clients means reducing profitability.

However, he believes it will be worthwhile in the long-run: not only could the clients grow in value over time, but if happy with service could refer friends and family members to the firm, which could open up new revenue streams.

“In the long-term we will benefit from it because these smaller clients are the bread and butter of the organisation.”

“We recognise that the person who is investing £10,000 may be the same person who invested £200,000 earlier. they might be someone who previously or subsequently invests more or refers us to someone who becomes a client.”