Encouraging engagement of consumers and building long-term trust is more of a primary consideration than instant profitability, according to Philip Dodd, who said more advisers needed to adopt to “semi-altruistic” model for sub-£20,000 clients.
The managing director of the recently launched Money Guidance website, which he co-founded with Alan Cheetham (owner of Bolton-based Alan Cheetham Asset Management), said the majority of “RDR orphans” cannot pay an ongoing service fee but still need to be serviced.
He said: “There will always be investors who will be happy to pay 1 per cent a year for an all-embracing service. But the majority of RDR orphans will not. If they are happy to invest their time in such financial stages as fact finds, cash-flow planning, risk assessment and asset allocation, a collaborative approach will always be preferable to a unilaterally imposed adviser opinion.”
Since the launch of Money Guidance as a community interest company in December last year, Mr Dodd said there may be some ‘me-too’ initiatives launched, because as with any industry, what “can be mechanised, will be mechanised”.
However, he said similar internet-based models will only catch on if more advisers adopt a “semi-altruistic approach” and offer premium content and services at a low pricing level.
Mr Dodd added: “We will try to build trust among those with £20,000 or less to invest. I would like to think that, in the long run at least, the hopes of [former FSA director] Peter Smith can be realised and advice can evolve to serve different segments in a cost-efficient manner.”
In March 2012, Peter Smith, who was head of investment policy for the former FSA, said that 30 per cent of people in the UK took regulated advice today but most took nothing.
He said: “We believe despite the effect of the RDR requirements, the majority of that 30 per cent who do take advice will continue to take regulated advice in one form or the other.
“In terms of simplified advice, some of the firms we have consulted with want to tap the 70 per cent that don’t take any advice. Others want to target their own customer base with a simplified model. So I think it is possible that simplified models will benefit that part of the population that does not already take advice.”