Clients tipped to continue downward pressure on advice fees

Clients tipped to continue downward pressure on advice fees
Credit: Chris Ratcliffe/Bloomberg

Advice fees are likely to come under pressure in 2021 against the backdrop of a challenging economic environment, according to a platform expert.

Sam Handfield-Jones, co-head of Octopus-owned Seccl, said clients would continue to put downward pressure on fees across the advice journey which, in turn, would encourage advice firms to find new ways to become more efficient and own more of the value chain.

He said: “If 2020 encouraged more firms to rethink their technology, 2021 will see even more act on that thinking.

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“In practice, I think more firms will look to capitalise on the example of early adopters by choosing to move away from simply white labelling an adviser platform to operating their own platform instead.”

By opting to run their own, in-house platform, advisers could better integrate their existing technology set, improve the end experience for their clients and capture a greater revenue share along the way, Mr Handfield-Jones said.

He forecast that smaller firms would also get involved in creating their own platforms, as the economics of the market had changed to allow the smallest of advice firms “get a piece of the action”.

Seccl’s technology allows advisers to create their own platform in-house. This means the adviser is in charge of operating that platform and can control the whole client journey, from client portals and logins to the fees they pay.

Currently, some five firms use Seccl’s interface with six more on track to use the service. Mr Handfield-Jones previously told FTAdviser he was expecting to “triple” the number of firms using the interface to 15 in the next six months.

Seccl recently appointed stalwarts from Quilter, Embark and Ascentric as part of its growth push.

Looking elsewhere in the market, Mr Handfield-Jones said it was likely the advice space would see a greater collaboration between firms of different types.

He said: “It’s not something that has been particularly forthcoming within wealth management and advice, compared to other sectors of the economy. 

“And that’s a shame  – fintechs have strong digital foundations, great UX and excellent digital marketing skills, while existing businesses have huge domain expertise and deep, trusted relationships. It’s a recipe for something special.”

But this was starting to change, Mr Handfield-Jones added. He said that while the first wave of fintechs had been primarily about “pure-play investing” rather than financial planning, the next round of firms coming through were focused more on the advice side of things.

“There was little robo, let alone advice about it. But as we see firms make inroads in their delivery of regulated advice to a new generation of consumers, there’s plenty of scope for exciting partnerships and collaboration,” he said.

“In that sense, I do wonder if we’ll see a slight shift in the narrative around ‘modern fintech versus traditional advice’ – from conflict to collaboration and partnership.”