Hornbuckle Mitchell says the number of Sipp holders that have become orphan clients has more than doubled in the last 18 months as a result of the RDR.
Speaking at the Money Marketing Retirement Planning Summit in Monte Carlo last week, managing director David White said the firm has seen the number of Sipp clients without an IFA rise from 700 to 1,800.
White said IFAs are dropping clients that are no longer economical to service as they segment their client banks.
He said: “We have seen the number of clients without an IFA more than double in the last 18 months as IFAs go through the segmentation process.”
He added some clients are choosing to leave their IFAs following the move to a feebased proposition and warned that he expects the situation to get worse as the RDR deadline gets closer.
Affluent Financial Planning managing director Carl Melvin says: “I think what Hornbuckle Mitchell is saying is right. IFAs are having to look at the commercial reality of servicing clients. It is an expensive business and when you add the cost of increasing regulation on top, it becomes even harder.”
Melvin says the move to fees, combined with increasing regulatory costs, are forcing many IFAs to adopt smaller but more lucrative client banks.
He says: “The new model for IFAs is about fewer clients, better relationships and more revenue. I think the increase in orphaned clients is entirely predictable and we will see more of it as we get closer to the RDR deadline.”