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Keep friends close and clients closer

Richard Leeson

One of the unexpected outcomes of the RDR is that it has created competition between advisers and providers for client ownership. Providers point to the need for advisers to maintain ongoing service to clients in order to avoid jeopardising trail commission. Advisers are arguing that providers are not privy to client meetings and that lack of evidence is not evidence of lack.


Irrespective of the rights and wrongs of both sides of the argument, the winner will ultimately be decided by the strength of the client relationship. Advisers may believe that they have the upper hand in this struggle by virtue of the face-to-face nature of their client engagements, but this could be a dangerous assumption.

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Taking my own adviser as an example, I invested through his firm into several Oeics three years ago. All three have performed well but, since the investment was made, I have received little or no ongoing support. At the time of investment I was aware that there were two choices – pay the adviser trail or let the provider snaffle it. Faced with such a choice I opted for my adviser to receive 0.5 per cent a year in addition to initial commission. Since RDR I have looked afresh at my position, but my adviser has not sent me any significant communication, reviewed my investments nor engaged with me about my investments.

He did write to tell me that wealth management would in future be dealt with by a colleague of his. While my holdings are modest I am not inclined to continue to pay a fee, which I can now turn off, for the level of service I have received. Having instructed my providers to remove the trail they have written to me highlighting all the additional services I now benefit from for being a direct investor. I have been avidly reading my valuations online and now can access online documents that my adviser never forwarded to me. There is a note of my unused Isa allowance, a profit and loss statement per holding, graphs highlighting the spread of my assets and other services. Not surprisingly, I am wondering what my adviser was doing for his trail fee.

Quite separately I am a co-trustee of a trust for a disabled person. Again the sums involved are relatively modest. My fellow trustee is a firm of solicitors who wrote to me three months ago asking me to sign a letter to various investment and insurance companies cancelling the trail commission payable to our financial adviser. By way of explanation, the adviser, a national firm, has not been in touch with either myself or the solicitor for over three years. It is difficult to believe that I happen to have experienced two unique situations – this behaviour must be being replicated across the country.

With many advisers offering tiered levels of service based on how economic the client is, it is inevitable that some clients in the lower tiers will feel disadvantaged and disengaged. It should not be assumed that a quiet client is a happy or satisfied client. The first that the adviser firm will know is when the trail fees stop, by which time only a reactive response is possible. The effort to convert a dissatisfied client back in to a contented client should not be underestimated and there is no guarantee of success. Given that the client is already viewed as uneconomic, it must be concluded that it would be equally uneconomic to attempt to rescue the trail fees. Is it worth an adviser taking the time to reinstate a lost £250 a year if it involves two hours’ work? Even if the client reinstates the trail there is still the fundamental issue of dealing with why he wanted to turn it off in the first place.