Given their profession, the idea of advisers suggesting to their clients that they might want to make their own investment decisions some of the time may seem a little incongruous.
However, for those who have already embraced it, there is a clear logic to adding ‘self-directed’ to their client servicing tool kit. By offering a self-directed service to those clients for whom full advice is not appropriate at this time, the existing assets can be retained while still allowing the client to make new investments. The firm can continue to demonstrate value to the client – providing valuations, tools and investing functionality – and therefore is at the front of clients’ minds when, and if, they decide they do need advice.
But self-directed isn’t just an option for existing clients. It can also help to attract a new, often younger, clientele that is confident about making its own decisions and doesn’t yet feel the need for advice. When they do need advice, the firm can be ready to serve them.
A big issue with a self-directed proposition is ensuring that it is appropriate and that all clients clearly understand that advice is not involved. Communicating what a self-directed service will and won’t involve – and recording the client’s acknowledgement of this – has to be a key part of the process.
We’ve been enabling advisory firms to offer a self-directed service to clients for more than 10 years, but have noticed increased demand in recent months. The growing popularity coincides with research showing that a third of financial advisers who use Cofunds are now offering or are considering expanding their self-directed or execution-only services following the introduction of the retail distribution review (RDR).
From asking 404 financial advisers whether they were offering self-directed services, 17 per cent said that they already offered these and 9 per cent were looking at introducing them. In addition, 53 per cent said they will not offer self-directed services, a noticeable decline from the 69 per cent reported a year ago when we asked advisers the same question.
For those who do decide that self-directed is a valuable addition to the suite of services they offer, the key is ensuring the microsites can be branded as their firm’s own and embedded in their own websites. Firms must be able to control which features and products self-directed clients can access. In addition, they should have access to advanced sales management information tools, which enable them to analyse their self-directed client base to assess, for example, unused Isa allowance or growing asset levels. As this is a self-directed, not an advised, service, assets can pay ongoing commission and platform costs should be able to be met out of the annual management charge on funds.
Looking at the results of our poll, and from talking to advisers, it would seem more and more are introducing or expanding self-directed services in order to maintain a relationship with a broad range of clients, which is great news for end investors.
Andy Coleman is director of distribution at Cofunds
