Advisers put off low-value clients by calls for segmentation

Parliament-UK-London-Bus-Transport-700x450.jpgLanguage encouraging advisers to only take on high-net-worth clients is not helping to improve financial inclusion, according to speakers at a parliament-hosted event.

Issues around financial exclusion and education were discussed at a panel debate hosted by Jonathan Edwards MP last night at the Houses of Parliament.

During the discussion, Rose & North Financial Planning and Wealth Management adviser Hayley North raised the point that many potential clients feel excluded from advice because advisers won’t take them on.

She said: “A huge part of the problem in terms client exclusion is the adviser’s door. The vast majority of advisers I speak to who won’t touch defined benefit advice because it is too risky, they won’t deal with smaller clients because it is too much explaining and it is too boring and they will only make a couple of grand.”

She added: “Everyone is so afraid or so bothered about profit margin that they are less concerned about offering advice to people who want it. We have no barriers, if someone wants to pay the fees they can. There are some issues about regulation and the cost of running a business but, to be honest, I’m not sure they are as big of an issue as we like to make out.”

North also said there is a problem with advisers being encouraged at industry conferences to “segment” their business and only target ultra-high-net-worth or high-net-worth clients.

Personal Finance Society chief executive Keith Richards agreed the language used does not help the sector.

Richards said: “We talk at events about evolving your business, segmenting it, only dealing with clients with a certain passive value and that does compound the issue about trust because politicians who hear us talking that way think we just dump poor people on the street and that we are not interested in the hard-working people who want to [better] themselves.”

He explained: “It is a fair point but my experience as being responsible for a very large IFA business, the vast majority of IFAs will deal with small value clients so long as they have a genuine need. We find lots of advisers give pro bono [advice] because they recognise clients don’t need their full service but they give them free advice.”

Chartered Institute for Securities and Investment financial planning head Campbell Edgar argued that many firms work on a “Robin Hood” basis with their wealthier clients subsidising the less wealthy.

Also speaking on the panel, Baldwin’s Accountants owner David Baldwin said he has noticed advisers struggling with smaller clients – particularly around auto-enrolment.

He said: “The amount of phone calls we have had from advisers asking us to find a solution for their client for auto-enrolment because they are scared to death they will lose them to another provider, so if we can sort out the auto-enrolment it protects them to keep doing the other work.”