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CWC Research: How to build a post-RDR adviser firm

CWC Research has published a study into how small and medium sized advisers can create a successful post-RDR business.

The report, No small change: Benchmarking the adviser business, commissioned by FundsNetwork, says adviser firms need to be more structured post-RDR.

It says with more management, operations, research, IT and compliance requirements, adviser firms must employ at least 10 staff to function adequately.

It adds advisers must have a much tighter grip on costs and more effective management if firms are to remain profitable.

CWC says companies should focus more on gaining income from financial planning than simply recommending investments.

The report predicts the average adviser salary will be £50,000 plus bonuses.

It says adviser salaries should make up around one-third of the total wage bill, with 1.5 paraplanners per adviser on an average salary of £30,000 plus bonuses.

The average adviser will have 100 to 150 clients generating revenues of between £150,000 and £400,000, increasing by 5 per cent per annum for the next three years.
In the CWC model, an average adviser has 25 chargeable hours to clients per week and advisers work to an hourly rate of between £150 to £200. Average clients are expected to pay retainer fees of between £50 and £200 each per month.

On adviser charging, the study says advisers should log the time spent advising clients and assess which clients are profitable.

Advisers should also have model communications with clients and stress test the impact of falling markets or an ageing client bank.

The report examines the cost of acquiring new clients and says firms will spend money on marketing, seminars, direct mailing, professional referrals and first meetings to build up their client bank.

The report emphasises that clients must belong to the firm and not the adviser, who may leave, retire or become ill.

It also examines how best to recruit new staff and manage advisers’ time, as the firm’s most valuable product.

It says firms should consider outsourcing paraplanner work, regularly retrain advisers and specifically define each role in the firm.

The managing director of CWC Research, Clive Waller says: “Adviser firms have made huge strides in changing their business models to meet the requirements of the RDR.

“However, this is only the starting point as all stakeholders – asset managers, platforms and distributors – will be evolving their propositions and new entrants will be pushing the boundaries to challenge current players.

“The successful adviser business will be curious and will want to continue the process of their evolution.”


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