The most successful post-Retail Distribution Review advisory businesses will get there by cutting clients and finding a specialist niche of higher net-worth clients rather than plowing more clients onto their books, according to one IFA.
In an interview with FTAdviser, to be published later today (27 September), Donald Fraser, senior consultant at London-based Capital Asset Management, says he runs a slim book of about 20 clients - yet turns over about half a million pounds annually.
Mr Fraser specialises in providing financial planning for successful media and sports figures, especially those who may have come into large sums of money very quickly. Although he deals with a very small client base, he claims this leads to stronger referral business.
He said: “I think a lot of firms haven’t yet got a proposition compelling enough so they can sit in front of a client and say, ‘we will do this for you and you will pay us £20,000 a year, every year’.
“No one is going to pay you £20,000 to say ‘put another £1,000 in your pension’. The better financial planners will deal with fewer and fewer, better clients.”
Since the implementation of the RDR rules in January, debates have raged over the viability of offering advice to ‘mainstream’ consumers. This has led many advisers to argue that advisers must look to higher net worth clients in the new world.
Mr Fraser is less bearish and said higher-value clients are not the “be all and end all”. He conceded too that operating such a specialist model as his would not be suitable for all advisers, drawing a parallel with the medical profession by saying advisers could either earn a comfortable living being generalists or choose to become top-earning specialists.
“If you are a general practitioner you earn 80 to 100 grand, but you are a ‘general’ practitioner. If you are a top spine surgeon you will be earning hundreds of thousands of pounds per year, but you will be dealing with very a specific market. You will be the go-to person for that.”
In a previous interview with FTAdviser, Mark Hibbitt, director of Bristol-based Sovereign Independent Financial Advisers, said that whether or not firms service so-called ‘low-value’ clients is a matter of choice rather than survival.
Mr Hibbert said: “What you tend to find is... if you are lucky enough where you’ve got a niche or a particular route to market that means you can sort of specialise and not deal with that level of client. That is more about adviser choice not to rather than it not being possible.”
The full interview with Mr Fraser will be published later today.