Investments  

Drop in advisers accepting £100k clients

Drop in advisers accepting £100k clients

Concerns have been raised over a "lost generation" of potential clients as new data shows advisers can no longer afford to service clients with less than £100,000 in investable assets. 

A survey of 250 advisers found only 16 per cent of advisers would take on a client with less than £100,000, when asked the minimum amount of assets needed to make it viable. 

Canada Life commissioned the research and warned the results were a stark contrast to 50 per cent of advisers who would be willing to advise clients with less than £100,000 in 2014, meaning one third of advisers have left that area of the market in five years.

Neil Jones, tax and wealth specialist at Canada Life, said the economics of providing advice had "fundamentally changed", labelling the shift as an unintended consequence of increased regulation and rising insurance costs in the advice sector. 

He said: "In particular, the cost of providing advice has increased. That clearly means some clients will struggle to get advice, as they are effectively priced out of the market.

"Perhaps this is a bill that we should be prepared to pay as a society, but it’s costing both advisers and the wider population dearly.

"If this trend continues it could create a ‘lost generation’ of potential clients for whom it’s unnatural to just pick up the phone to their adviser, or to create a comprehensive financial plan."

Mr Jones said for advisers the reality of rising costs had made it necessary, potentially permanently, to shift their focus towards wealthier clients and also to explore different income models.

Earlier this year FTAdviser reported the Mifid II rule requiring advisers to perform annual reviews of investment portfolios was forcing intermediaries to turn away clients, in particular those with more modest portfolios. 

The rule requires that advisers spend hours reviewing the investments, whether the client specifically requested it or not, meaning clients with smaller pots to invest are no longer profitable for some advisers. 

Martin Bamford, managing director at Informed Choice, agreed that rising regulatory costs and business operating expenses have forced up the average value of a financial planning client.

He said: "With limited capacity and growing demand for financial planning services, as the post-war baby boomer generation reach retirement age, there is also a natural tendency to focus on those clients where we can deliver the greatest value.

"Financial planners probably have another 10-15 years of engaging with affluent retirees, before they will be absolutely forced to develop propositions for other markets.

"There’s a good argument for working with younger accumulators today, in order to secure the future of the business, but for those financial planners approaching retirement themselves, the motivation just isn’t there."

Canada Life also found advisers were starting to employ new tactics to attract younger clients, with 35 per cent changing market strategies, such as using more social media, and 33 per cent planning to adopt a more technology-based service rather than face-to-face meetings.