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How advisers are approaching mass market advice

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Advisers are grappling with the “double-edged sword” of whether to offer advice to lower value clients and how they can do so profitably.

Much of the debate in the run-up to the RDR, and since it has been introduced, has focused on access to advice once charges are made explicit. Money Marketing spoke to a selection of advice firms, large and small, to find out whether poorer clients are being shunned by advisers.

Some firms, such as AWD Chase de Vere and Towry, have set minimum asset levels clients need to have in order to be able to receive advice. Other firms, including Tenet, Foster Denovo, St James’s Place and Positive Solutions do not set minimum asset levels, saying it is up to individual firms to develop their own business models.

AWD targets “mass affluent” clients with assets of between £50,000 and £375,000, and high net worth clients with assets of over £375,000. It is not taking on clients with below £50,000 to invest.

For existing clients with under £50,000, AWD offers a largely reactive telephone and email-based “primary” advice service. Clients using this service who want ongoing advice are charged 3 per cent for the initial advice and 1 per cent ongoing. For one-off advice clients are charged a hourly fee of £200 per hour, which is quoted as a fixed fee upfront.

Towry only takes on clients with investments of over £100,000, which is also the minimum clients need for discretionary investment management. Typical Towry clients have assets of between £300,000 and £500,000.

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Foster Denovo has adopted a different approach, with three different service levels for clients including a “pay as you go” transactional service. The company is also looking to provide financial education in the workplace for corporate clients.

Tenet group distribution and development director Keith Richards says while the network does not impose minimum investment levels, he believes they may become more widely used by the industry in future.

Richards says: “It is certainly not the intention of advisers to turn their backs on mass market consumers, but the increasing cost pressures of regulation and risk are forcing the issue.”

Attain Wealth Management managing director Gordon Crothers says he has purposely not set a minimum level of client assets. He says: “It is a double-edged sword because it is difficult to deliver something that is cost-effective and fair to other clients that are paying a substantial fee for advice.”

Attain has around 30 active clients with assets below £100,000 and the service is geared around the use of platforms and passive funds. Face-to-face meetings are not provided and reports are produced annually rather than every six months.

Crothers says: “It is possible to deliver this service profitably, but the main thing is clients understand what to expect. That said, there is a finite level of smaller value clients that firms can take on in terms of the physical administration involved.”

Yellowtail Financial Planning managing director Dennis Hall says: “I am positive there is profitability in delivering mass market advice. Getting the funds to develop these things can be difficult, but technology is getting cheaper and people are getting more creative with advice webinars and client meetings via Skype. We need to do for advice what Hargreaves Lansdown has done for funds sale and commoditise it as much as possible.”

Some businesses are finding ways to make mass market advice work. Investor Profile delivers telephone and email-based chartered and certified financial planning advice, with costs ranging from £40 for drop-in “investment surgeries” to £2,500 for a full lifetime financial planning report.

Director Jaskarn Pawar says: “Progress is about finding ways to do things which previously have not been tried or thought possible. My view is high-cost advice is just as difficult, if not harder to deliver than low-cost advice, because you have to justify the value for money even more. Innovation, technology and the will to be different will make low-cost advice possible.”

 

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Aren’t you really looking at a new situation using an old frame of reference. Trying to make an old revenue calculation fit the 2013 model is never going to produce an elegant or worthwhile solution.
    How about throwing it all out and starting from scratch.
    Provide a compelling value proposition and a better engagement conversation—people pay, regardless of the amount of money they have to invest.
    The paradigm has shifted and everything has gone back to zero. It’s time for a new model, not the old one dressed up in newer clothes.

  2. If you are truly to be perceived as an IFA then each and every person who asks you to give advice on financial planning is entitled to the full service but now must be clear that this will cost them fees and commission spread during the term of their investment or pension is no longer available.

    That should close down another 30-40 % of existing IFAs, so as far as the FSA is concerned, JOB DONE!

    Oh and there is no plan B if RDR adversely affects the capital input into the markets.

  3. As an IFA who has given advice to low net worth individuals and received commission that could have been clawed back to me not the client who at the time could not afford my upfront fee I forone will let the mass market go elsewhere as it is just not profitable to take on clients who think they can pay £10-20 per hour for my time

  4. So where are the online systems that are going to pick this up? Surely it canot be too difficult to set up an online risk assessment system, then put the client into a model portfolio or DFM fund with no intervention by the IFA, not exactly execution only but not advice either. Payment comes by a charge on the money invested.
    Once set up just runs itself and all the IFA has to do is monitor the underlying funds.
    Just needs the money to set up the system, who is going to do that? certainly not the Networks, or it seems larger IFA’s, maybe Tesco’s, Sainsbury’s etc.

  5. This is a silly discussion. Surely everyone is busy? If so why bother with the mass market at all?
    By all means do the charity work for your exisiting clients, but don’t target the low end, that’s where you go when you’re short of work. Let them eat cake!

  6. As we all know, MAS does NOT give regulated advice. A loit oif consumers want things explained to them in a way they understand and because no it all consumers think the same, a computer will not help, you need hum an intervention & whilst phone & skypoe does improve communication, there ius NO substitute four face to face! You can see when consumer nods in understanding that their face tells something different and then explain again in a different way. Consumers need money coaching, at a fair price, but advisers need to be protected from the FOS accessing advice being given when it has NOT, it is info and guidance but at the moment only MAS, a quango, has this protection. and advisers and tgeiur cliuentrs pay for it, NOT consumers. This is SO wrong. FSA have been TOLD that fiurms like mine can evidence when advice r information only has been poroivided as we have recorded all consumer meetings since 2007, including phone calls with FSA staff with their knowledge. Hector Sants told the TSC “simplified advice” (guidance or info only to you and me) would be an essential part of RDR, Sheila Nicholls sat their and smirked. Neither derliuvered on thius commitment to the TSC and still one oif them ius rewardedfoir thius failure with a Knighthood!

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