As the year marches on, Middle Britain is going to find it increasingly difficult to get regulated financial advice in spite of the obvious need.
The decline in adviser numbers is reaching shocking proportions. Ernst & Young’s prediction at the end of 2013 is surely not too far off the mark given the fact that some advisers are obviously struggling with the charging and cashflow challenge.
It is true that adviser numbers have been falling for years. But surely we need to ask how much further they can fall. John LappinThe demise of bank advice, apart from L&G’s admittedly not insubstantial links with many building societies, has probably shocked policymakers as much as anyone else. Yet I expect we will merely see some fiddling around the edges with simplified products and perhaps simplified advice. The objections haven’t changed substantially.
It is true that adviser numbers have been falling for years. But surely we need to ask how much further they can fall. Will a leaner, meaner, customer agreed advice sector halt the decline and then reverse it?
Of course the answer is yes for some individual businesses. They may be profitable, and plan to expand carefully or, even more carefully, take over others.
But this may not represent much of an expansion of advice, merely a shuffling of the deck of cards. It is certainly unlikely to see advisers lowering the minimum assets they will advise upon.
Some firms will not get rid of clients because they believe one day they may become profitable. Some firms may advise, younger, less well off (for now) family members as financial planning versions of family offices.
But on the whole, when I ask advisers with minimums whether new efficiencies will see that minimum fall one day, at best they say “perhaps”. Most investment advisers seeking to work with lower net worth clients are doing so either through execution-only – which is seeing a mini boom – or execution only plus occasional advice.
This context makes the recent remarks from Hargreaves Lansdown chief executive Ian Gorham so interesting. When I asked him about orphaned clients and HL’s response, he said that, having sat in on the telephone helpline, the firm was seeing more queries along the lines of what is an Isa, rather than what is the Isa limit this year. He felt that some potential clients would not be able to get over the barriers to becoming execution-only clients. To that end, he was looking at bringing the advised minimum down to £20,000 from £50,000.
From the tone of Mr Gorham’s remarks, it is early days. There are surely issues with capital strain until these clients become profitable. But it is not beyond the realms of the imagination, to envisage HL scooping a whole new cohort which should be profitable one day.
I had another conversation recently with Nucleus’s business development director Barry Neilson. He was discussing the recent inclusion of a protection product that clients could take out designed to pay out to the level of the target portfolio in the event of their death. Neilson said Nucleus would be looking at more ways to sweat the technology.
This is my connection not Barry’s, but I wonder if innovative business partners in the wrap world coupled to post-RDR innovation in the advice sector will allow some advisers to look again at the minimums. Alternatively, investment advisers could leave HL to clean up – yet again.
John Lappin blogs on industry issues at www.themoneydebate.co.uk
