‘Direct models may push advisers out of industry’

A joint survey conducted by the Cass Business School and investment house BNY Mellon found that only 9 per cent of advisers perceived retail platforms and online stockbrokers as serious competition to their services.

The 31-page report warned that advisers may have to leave the industry or accept lower revenue as they are forced to jostle for a limited pool of high net-worth clients in order to sustain current levels of business.

The typical amount seen as necessary to maintain revenues was £1500 for each client each year, meaning that clients would need £150,000 in tangible assets to keep charges at 1 per cent. Advisers can expect only 30 clients with such assets on their books.

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In the report, Scott Goodsir, head of UK wholesale for BNY Mellon, stated: “This suggests that competition for clients with substantial assets will be fierce, including from private banks. There will inevitably be a large number of disappointed advisers who will leave the industry.”

The survey also found a potential retreat from the mass market for most advisers, with 53 per cent saying they found this potential client bank “less attractive”, and a quarter describing it as “very unattractive”.

Key points:

64 firms were surveyed for the report.

5 per cent of respondents saw their role as fund selector

39 per cent classed themselves primarily as financial planners.

56 per cent planned to combine roles in the future.

Adviser comment
Andrew Reeves, founder of Northamptonshire-based The Investment Coach, said: “Everyone has got to keep on top of marketing. Advisory firms that can run better education and coaching schemes will attract more potential clients. Much of our business comes from people who have seen and interacted with our website.”

APFA comment

Chris Hannant, director general of the Association of Professional Financial Advisers, said: “Some people will always want financial advice while others will do things themselves. I believe there will always be a need for advice but quite what the size the industry will be in the next few years as a result of RDR, I cannot predict that.”