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Firms urged to diversify from AUM

Outgoing Personal Finance Society president Robert Reid has warned that adviser businesses relying solely on assets under management could be hit by losses of 30-40 per cent this year.

Speaking at the annual PFS conference in Birmingham this week, Reid said firms in such a situation need to diversify their businesses to ensure they survive the current economic climate. He said: “Don’t just focus on assets under management. It is about extending asset allocation principles to the rest of your business. Have a succession plan in place and remember that planning is for your business too, not just your clients.”

Reid also told advisers that to survive, they have to adapt their methods of communication to suit different consumer groups. He pointed to the “iPod generation”, young people who are insecure, pressured, over-taxed and debt-ridden. Reid said: “This group has a high likelihood of taking advice but they think a lot of products are too complicated. Advisers need to communicate at the right level and in the right style to suit individual consumers. That will truly enhance the value of their business.”

Helm Godfrey managing director Bruce Wilson says: “Advisers will need to be careful not to jump out of the commission frying pan into the funds under management fire when shifting to a new model. Being entirely reliant on assets under management means being a hostage to fortune and if the bear market continues, then advisers may have to look at charging a set fee rather than a percentage of a client’s portfolio.”


Fine line on with-profits

The latest stock-market turmoil has inevitably led to the introduction of market value reductions on surrender of with- profits policies and that has equally inevitably led to ill-informed consumer press comment about investors being penalised by insurance companies.

Rebalancing act

I have been told that I need to periodically rebalance my portfolio. Please explain this and indicate how frequently I should carry it out.


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