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‘Prohibitive costs hit execution-only plans’

A poll of 1056 advisers by the London-based research consultancy revealed that the equivalent of 2525 were considering adopting an execution-only service.

Craig Phillips, principal of CoreData Research UK and Europe, said the transition to the post-RDR environment and the cost involved in setting an execution-only service had discouraged firms. However he added there was a clear gap in the market as more people were comfortable researching and selecting their own investments.

He said: “With the launch of an execution-only arm perceived to set back an adviser business tens of thousands of pounds, the pure economics of this offering are likely to exclude a number of potential entrants.

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“There are also regulatory issues with the FCA now taking a close look at this area of the market.”

The research also revealed that the size of the execution-only market remained small with only 2000 advisers offering the service, a slight increase on 1950 in 2012.

Other key findings included:

• Equity Isas remained the most common product on execution-only platforms and 92 per cent of firms planning to add the service are intended to offer the products.

• 42 per cent of firms planning to offer the service had yet to determine how they would charge.

• Only 25 per cent planned to use an explicit service charge, indicating they may look to introduce clients before charging them

Adviser View

Six months ago Surrey-based Informed Choice launched a direct-to-customer platform. Martin Bamford, managing director of the firm, said: “We see this as a growth area for customers, especially with clients in the accumulation stage.

“However, in some ways it is no surprise that interest in this type of proposition has fallen as many IFAs have had other priorities, and there is a cost involved in setting this up.”