The advice gap could be as much a result of the increased burden of regulation as it is to the switch to fees brought about by the Retail Distribution Review, IFA Peter Curtis has claimed.
Founder of London IFA IDFM, Mr Curtis told FTAdviser that the ever-increasing burden of paperwork over recent years and exacerbated by the RDR has forced him to turn lower-value clients away and shun previously lucrative high-volume business such as setting up Isas.
He intimated that, if this is indicative of a trend across the industry more clients could wind up opting for direct options, which he said increases the risk that clients could stray out of their depth and purchase less-than-suitable products.
“There’s a lot of good things in what’s happened [with the RDR] and this moving over to review process of clients I think is great.
“But they’ve basically gone over the top in terms of paperwork which is the big failing of this whole process. So if someone said, ‘I’ve worked out that there’s a hundred different stages to an advice process working out an Isa’, I wouldn’t be surprised.
“They’re basically churning out more process more process, process, process. In any other business someone would say in any process you have to work out how much time this is going to take. You can’t just keep layering on more process layer after layer after layer.
“OK it now takes 24 hours to do an Isa - I’m exaggerating - but in reality unless there’s other business going on with a client that makes it overall profitable we don’t do Isas.
Mr Curtis said he now approachs new prospective clients by assessing whether there is “common ground” on doing profitable business, which is inevitably leading him to move up the value chain.
“One of the first things you have to work out with a new client is are we going to reach some common ground here about doing a piece of business early days that’s going to be profitable, because otherwise this meeting isn’t going to go very far.
“Which is fine, because there’s plenty of people with money who need advice which is who we are looking for.”
Mr Curtis thinks the FCA intends for non-advised services to close any advice gap created by the switch to fees and the increased compliance demands.
“I think in a way the FCA kind of knows that Joe Public is going to get picked off and served by direct providers. There’s a massive chasm in the marketplace for low level business that isn’t being met properly.
“You’ve either got direct or you’ve got some advisers who have developed process - they wouldn’t be Sesame members because Sesame wouldn’t allow it - but they have some... software to manage that.”