CompaniesMay 10 2013

IFA: I can add value for clients with as little as £10k

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ByMichael Trudeau

Providing advice for lower-value investors can still be financially worthwhile for both the adviser and the client, with even clients with as little as £10,000 to invest able to benefit financially net of fees, an IFA has argued.

In an interview with FTAdviser, Toby Mansfield of Clarity IFA said he targets clients with at least £30,000, but has continued taking on clients with far less to invest despite the ban on commission brought about by the Retail Distribution Review.

He argues that to make this profitable advisers must charge a higher fee than they would have received in trail pre-RDR, but that even after charging this fee the value added from good financial advice will lead to a better net outcome to the client.

Others have argued that since the ban on commission, the increasing costs of servicing clients under the new rules and other factors such as regulatory costs are driving adviser chrages up to a point where it is not financially viable to service low-value clients.

Some have said clients with less than £50,000 to invest are unlikely to benefit from advice, while others have said it is unlikely to be viable to service clients with less than £100,000.

This, combined with exits from the industry of major banking groups, has led to fears of an ‘advice gap’ that will leave many vulnerable consumers without access to sufficient help and support for their finances.

“If somebody came around with £10,000 last year, the adviser would have to sit in front of them and do the work for 0.5 per cent.

“[Post-RDR] if the advice [fee] is 3 per cent it’s £300; it comes off and they can add value to that. If they invested in a bog standard fund it would have retained this, but with me you could have got this return.

“You have got to value your service and if you can’t do that you won’t make money.”

Mr Mansfield maintains that lower-value clients will still want face to face, independent advice and be willing to pay for it post-RDR because it will lead to better returns.

However, although he says he can profitably service these clients he admits that as business picks up they may face the chopping block.

“It may be that in the future my smaller clients may have to suffer, but if a client calls me up and says ‘I have 20 grand to invest’ I won’t say sorry I need another 80 grand.”

To read the full interview with Mr Mansfield, click here.