RDR priced 60,000 clients out of advice

Since the implementation of the RDR, 60,000 clients considered ‘lower value’ have been priced out of advice, according to research commissioned by the Association of Professional Financial Advisers (Apfa).

A survey compiled by NMG Consulting showed 47 per cent of the 328 investment advisers polled had turned down clients because their needs could not justify the cost.

Jason Lurie, chartered financial planner at wealth managers Holland Hahn & Wills, found this to be consistent with his experiences.

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“Because we’re wealth managers, we have always had to turn down clients that are accumulators, rather than people who are close to retirement,” he said.

“Since the RDR, there is a greater compliance burden and I think we have to be very careful about who we’re taking on. While it has to be good value for the client it also has to be profitable for us.”

The message coming from advisers and Apfa alike is that the regulator needs to do more to alleviate the cost burden.

Apfa itself is demanding a regulatory dividend for financial advisers since, as an industry, they represent a lower risk than bigger firms.

Since part of the purpose of the RDR was to increase accountability and decrease risk, advisers and trade bodies are asking why they are not reaping any cost benefits.

In November, Schroders carried out a similar survey among advisers that showed 14 per cent had formally requested that clients leave their practice in the past 12 months because their portfolios were not valuable enough – three-quarters of the 14 per cent had a portfolio of under £50,000. Schroders’ research also showed 60 per cent of 328 advisers surveyed outsource their client portfolio management (see Table).