Advisers to step up DIY solutions for clients

Less than 2,000 advisers across the country offer an execution-only service - the financial equivalent of DIY - to their clients, according to an annual study carried out by research firm CoreData.

This number is expected to increase, however. The CoreData report, entitled Execution-Only Platform Study 2012, suggests a further 3,425 advisers are scheduled to begin offering execution-only services to clients in the next two years.

Furthermore, the study shows that 70 per cent of those advisers who are yet to offer execution-only services via a platform, but plan to do so, expect to make this service available to new ‘non-advised’ customers.

CoreData’s study, which the firm says aims to deliver administration providers key insights into the shifting demands of advisers and comprises an array of empirical data that identifies developing trends in the market, is by no means the only source to have suggested a move towards DIY services.

The RDR has placed an increased burden on anyone seeking to offer financial advice. As a result, it has made advice more expensive for clients. If clients are unwilling to pay the extra cost, or the adviser disinclined to shoulder the extra regulation, DIY services may work out better for both of them. If clients are willing to pay the extra charges, however, they may need extra services like execution-only to make the cost of advice worthwhile.

CoreData Research UK principal Craig Phillips says: “Against a backdrop of new regulatory change and compounded by the challenge of would-be client reluctance in paying a true price for advice post-RDR, it all adds up to advisers seeking new income streams.

“Adding an execution-only service is not just about new sources of revenue, though. For 55 per cent of advisers planning to add these services their intention is to do so as a value-add for existing clients.”

A large proportion of advisers expecting to provide a transaction-only service (45 per cent) have not yet determined how they will charge clients for access to this facility, but 30 per cent plan to bring in some type of service charge to cover the cost of access. One in five advisers plan to charge an annual flat fee. What is notable, however, is that almost none plan to offer this service for free.

Initially, execution-only may be an easier route for advisers who are already hooked on platforms already. Advisers who already offer execution-only services use platforms more often compared with advisers planning to offer this facility, the research reveals. However, the latter are not far behind, as they are more likely to use platforms two or three times a week than their counterparts.

Furthermore, advisers recognise that what they demand from a platform may not be exactly what their clients want. Unlike advisers using platforms as part of their advisory business, who according to the results from the Investment Adviser Platform 2012 survey place high importance on the range of tools and services offered by the platform, those in the execution-only space instead see simplicity and ease of use, as well as the ownership structure of a platform business, as more significant.