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FSA: Most advisers will not dump mass market clients

Linda Woodall 200
Linda Woodall

Research by the FSA shows the majority of advisers plan to continue advising clients with savings and investments of up to £75,000.

The Sunday Times reports a survey by the regulator found that 63 per cent of advisers are looking to retain clients with savings and investments of between £20,000 and £75,000. A further 38 per cent of advisers polled plan to continue servicing clients with less than £20,000.

FSA head of investment intermediaries Linda Woodall told the newspaper: “We are encouraged to see a large number of advisers plan to provide advice to people with smaller pots to invest. It is important that a range of services will be available for consumers once the changes to financial advice come in.”

The FSA’s findings follow research published by Deloitte earlier this month which suggested over half of consumers would be likely to reduce the number of times they used an adviser if they were charged 3 per cent of their investment.

Deloitte estimated up to 5.5 million customers would stop using or lack access to advisers post-RDR as a result of adviser charging.

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Comments

There are 27 comments at the moment, we would love to hear your opinion too.

  1. Oh yes we will!

  2. I will continue to advise anybody as long as they are prepared to pay the fee for the advice and service which I am qualified to provide. The slight breakdown in the dynamic is whether they will be prepared to or able to afford to pay….

  3. Yes this is probably true but only because IFA’s are so loyal to existing clients, IFA’s will have a view that It is both morally and ethically wrong to dump clients that you have had relationships with over many years. It is such a shame that the FSA do not have the same morals and ethics

  4. Remember this ladies name, Linda Woodall, and the date and the statement. Will refer back to this in twelve months time for ratification/confirmation.

  5. No, I’m sorry but I don’t plan to run my business as some kind of loss-making hobby. It is not rocket-science, it’s simple maths. Each client must be viable. Anyway, I have already, although unwittingly, catered for those with smaller pots to invest by part-funding the Money Advice Service.

  6. Most advisers are going to TRY and keep their mass market clients but as soon as they find out as I have they will not or cannot pay up front then they will be dumped. No Ifa can survive on say taking £10 pm from a regular premium pension or savings without doing a great deal of business that is not there

  7. I am sure that advisers will continue to service clients with smaller pots to invest but i also expect that these advisers will have minimum fees too. this will mean that although the adviser is prepared to advice these clients, the clients are probably unlikely to want to pay such a premium for the advice.

  8. What an odd survey. In reality, it may be more a case of demand driving the supply of advice. The survey would suggest that 37% of advisers have made a conscious decision not to service people with between £20k-75k in savings, regardless of demand.

    Given that there will be fewer advisers and that almost 40% of those remaining won’t service lower savings clients, I’m surprised that the FSA can feel “encouraged”. Unless they are working on the basis that 63% of something is better than…well, nothing.

  9. 100k will be our minimum. No more free work. Feel sorry for consumers who won’t be able to get extra allocations from provider offers. No more commission rebates. What an utterly stupid regulatory change this is. Idiotic. I’m speaking here as IFA since 1991. Even at this late date why not listen to the good sense of the TSC?

  10. That is exactly what the FSA wants, the trouble is as has been pointed out by Keith Jayne, all clients must be financially capable of paying an appropriate fee for our services. The best way forward is of course to wait and see what happens post RDR cliff edge. As there appears to be surplus of millions of consumers who appear to be destined to be sidelined, some of those may be picked up and added to existing advisers client banks.

    IF I get past the RDR cliff edge with level 4 (10 credits to go) I will be seeking out those who need me with vigour to add to my business value.

    (A wish too far methinks)

    No, what will really happen is that a steady inexorable decline in our client bank numbers will occur once the general public realise that the cost of advice may not be affordable in the context they wish it to mean for them and more will go for direct providers and / or sales websites to suss out so called “best buys” I am sure the mail on sunday with its comprehensive money pages will sort it out for them. (NOT!)

  11. I’m interested to know where the description “mass market clients” originates – is it Moneymarketing’s headline writer – or words the FSA have used? I wasn’t aware that any clients who are currently advised by proper advisers are really deemed “mass market” as each one has an INDIVIDUAL factfind compiled as well as an INDIVIDUAL suitability letter produced to justify INDIVIDUAL recommendations made, as well as illustrations etc etc.

  12. Hang on a minute surely TCF (amongst other edicts from on high) would ensure that we only provide a service that fairly charges the client. Only problem is that clients can’t afford to pay what we need to charge to remain viable not only as IFAs but as businesses.

    Will we dump clients? It’s already happened. Paid off staff? Not yet – but we’ve taken out redundancy protection for them.

  13. Linda Woodall–“We are encouraged to see a large number of advisers plan to provide advice to people with smaller pots to invest. It is important that a range of services will be available for consumers once the changes to financial advice come in.”
    If its that important whats the FSA going to do about it?
    They should have done the sensible thing by introducing a cap on commissions. Imbeciles.

  14. I would love to know where they get these figures from ?

    I have never been asked, nor do I know any-one who has been asked to provide such information or take part in any survey.

    I am sure most of what the FSA say is just B~@~~ks or wish full thinking !!

  15. FSA’s strong point obviously isn’t in simple maths! I make that 101%.

    Mind you, I am not sure what their strong point is.

  16. The problem for consumers with comparatively small investments is that the fees now required to make an IFA viable will negate the value of the advice.

    It’s simple maths.

    Small investors will be better off on deposit.

  17. Nicholas Pleasure 19th November 2012 at 11:29 am

    Why is the FSA wasting our cash on pointless surveys?

    The real survey is only six weeks away and I suspect the FSA fear that the result is not going to be pretty.

  18. What outcome do you really expect when you have the Dumb-Nuts leasing the blind?

    As in Anumal Farm, the pigs are walking on two legs.

    Have a GREAT day!

  19. Any adviser that does look after the small invester is because of loyalty to them something the FSA hasn’t a clue about.
    The FSA have given no help or support to the adviser nor the small invester.

  20. Yet more propaganda from cloud cuckoo land.

    This is what passes as fact when you don’t have to earn a living and you have your wages harvested from the money tree at the bottom of the garden and handed to you on a plate at the end of every month.

  21. We will continue to service and deal with enquiries from existing clients with limited resources. These people have stood by us and depended on us for years. We are not going to break that trust now. New clients will only be accepted if they meet our criteria based on increased costs and qualifications.

  22. “63 per cent of advisers are looking to retain clients with savings and investments of between £20,000 and £75,000”
    I simply dont understand the point of this survey/conclusion at all. (Do people actually get paid for doing this??)
    Surely its really simple – ALL IFAs would be “looking to retain” ALL their clients IF their clients agree to pay the level of fees that the IFA requires for the relationship to be commercially viable. So its the clients decision not the IFAs. Conversely, why would any business (in any industry) wish to “retain” ANY clients who ARENT paying a commercially viable fee?
    Durrrrrrrr…………….

  23. What a farce. The public have no idea what awaits them in 2013! The media don’t give a hoot. They’re waiting for the advice train to derail before writing about it, as it makes for a better story.

  24. I trust the Deloitte figures more than the pontifications of La Woodall. No doubt she’ll jump ship along with all the others when the fallout is made clear. She’ll go without a backwards glance at the mayhem she’s left behind.
    You couldn’t make it up….. Unles you were Alan Aykburn who specialises in farce.

  25. Baffled (20/11/12 6:53pm) is right. It is a question of consumer demand.

    If the recent survey reflecting £50 per hour rate for advice is representative of demand, then an adviser working a 1500 hour year (full chargeable capacity) can earn a maximum of £35K for himself and £35K for his organisation’s overheads and £5K profit (at say 6% a year). It will be a very tough model to work if the annual chargeable hours fall to say 1000 as neither the company nor the adviser can survive in the medium term. Naturally, the consumers’ view will change in the medium term until we get an average hourly rate of say £75+ with at least half of the work being done by administrators earning £25K a year and the rest byadvisers earning £50K a year. This would then mean that 2000 hours @ £75 = £150K income of which £75K would go to staff, a similar or lower amounts to overheads and a residual profit for the company. Prepare for rocky times, folks.

  26. I used to be able to carry these sorts of Client…. a bit like carrying a heavy stone around, but one had the strength, so one helped.
    I’ve run out of strength and I’m letting the stone go, just to survive to the finsh line…. that’s if the FSA don’t sever my hamstrings in the meantime on top of the poison they’ve administered to my business.

  27. This is the reply I got from Jenny Frost at the policy division of the FSA on this issue.

    When did full commission disclosure in the body of Illustrations and Suitability letters become hidden from the client ?

    Somtimes one has to actually understand that the people responsible for this debacle do not care on jot for the consumers. Even if what she says is correct, that still leaves an estimated 2million people unable to afford advice.

    What does an adviser do when once the income and expenditure analysis is completed and it shows the client is living on a restricted budget and is clearly unable to pay for advice by fees, do you refuse to provide advice and service or get the heck out of dodge before the manure hits the fan and then client says “how much?”

    The attitude of the regulator is unbelievable and they have not published this research

    Ah well soon be Xmas!

    Bahhhh Humbug!!

    Dear Mr Naylor

    Our previous letters to you last year responded to points you made then about access to advice. As regards the Deloitte research you refer to in your email below, I would like to make the following points:

    The 5.5 million figure quoted by Deloitte includes 2.5 million mass affluent (£10K-50K to invest) and 600K affluent (with £50k-£100k to invest), in other words people who would seek and more importantly be sought out by advisers as potential new sources of revenue. In fact the full Deloitte report makes this very point, that the supposed gap is an opportunity for incumbent firms to service these ‘orphaned’ clients. This supports what we said in the letters to you last year.

    The 5.5 million figure also includes not just those unable to obtain advice but also those who choose not to take advice once they know the true cost, which was unclear or hidden under the commission system. So these are consumers who make an informed decision to go direct, and who cannot be described as genuinely ‘disenfranchised’ – rather they have the ability to obtain advice but choose not to go down that route.

    The report highlights a current distrust of some advisers by consumers. The new regime offers firms who can provide a good service and persuade consumers of the value of advice, or who take non-traditional approaches to service consumers, the opportunity to move into any short term gaps or expand their business.
    In conclusion, we continue to consider that the new RDR rules are necessary to allow the investment market to operate efficiently and transparently to the benefit of both consumers and advisers.

    Regards
    Jenny Frost

    Jenny Frost
    Policy Division
    Conduct Business Unit
    FSA

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