PFS: ‘No evidence’ of growing advice gap

A mass shedding of lower-value clients by advisers as they move up-market post-Retail Distribution Review has failed to materialise, the head of the Personal Finance Society said.

Keith Richards, PFS chief executive, told FTAdviser that although it is too early to say definitively one way or the other he has seen very little evidence of more ‘orphan clients’ being created in the wake of the RDR.

He said: “Nothing has fundamentally shifted as of yet and time will tell just what the true impact of RDR will really mean for both the sector and the public. But I’m not hearing any advisers saying that they really have segmented and stopped advising clients below a certain asset pool.

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“There’s lots of talk about people changing the model and segmenting and only dealing with clients of a certain value. We are seeing very little evidence of that as we are talking to advisers.

“So whether it will be a future stage or not, some almost certainly have implemented those but they probably represent a relatively small percentage of the overall market at the moment.”

The exact size and nature - or the very existence - of any advice gap created by the RDR has been the topic of much debate since the new rules came into effect.

However, data from adviser review website revealed while 46 per cent of 903 advisers said they will deal with any level of wealth, a further 23 per cent apply a floor of £50,000 of investible assets.

In April, the Financial Conduct Authority admitted it had not yet quantified the gap, despite its predecessor having promised to publish such a study in January.

Mr Richards added: “People keep talking about orphan clients. There are not orphan clients, there are probably transactional clients who don’t need an ongoing service, but actually sit in the adviser’s client bank and one day they will want service or the adviser might re-approach them every two or three years.

“We have got to be very careful. There is no evidence of any wholesale taking clients below a certain asset value and discharging them, it just hasn’t happened. Consumers are not being denied.”

He concluded that the true consequences of the RDR will become apparent in the next year and a half.

Several advisers have described to FTAdviser the methods they use to make sure even low-value clients are not left without access to advice.

For example Jaskarn Pawar, sole practitioner and chartered financial planner at Northampton-based advice firm Investor Profile, said he could serve clients with any level of assets by charging as little as £40 for a half-hour telephone call.

Earlier this month, FCA chief executive Martin Wheatley told MPs he believed that if a gap exists, it could be filled by innovative online solutions.