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Deloitte: Advisers must halve fees and focus on mass market

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Advisers will need to halve their fees and focus on serving mass market clients as there are not enough high-net-worth clients to support the industry, according to Deloitte.             

A research paper published by the accountancy firm claims there are not enough clients with £200,000 investable assets and above to sustain the current adviser community.

The paper says: “Advisers could do better by focusing on tailoring propositions to the different segments and increasing efficiencies throughout the whole sales funnel.

“Reducing annual servicing cost per client from £1,000 to £500 would allow advisers to profitably serve clients with less than £100,000 in investable assets.”

The paper also states that current charges based on typical investment cases suggest financial adviser fees are more expensive than that of banks.

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Comments

There are 42 comments at the moment, we would love to hear your opinion too.

  1. This is a firm of accountants being used by FSCS to assess compensation claims amongst other things. Would they work for half their normal fees? Of course they wouldn’t so neither should IFAs. The losing of the mass market for IFAs is down to the FSA’s RDR scheme, nothing else! Get real Deloitte.

  2. A firm of accountants telling advisers to half their fees at a time of ever increasing costs. Now there is sound advice. Do they think that people are queing up outside our doors for advice that we can afford to do that? What planet are they living on? Any comments?

  3. FINALLY !!! Someone has spoken the truth that dares not say its name. The industry has been kidding itself that the world is full of HNW clients for years. (Listen to a bunch of drunk IFAs in a bar listen to them comparing the size of their FUM)I In reality, IFA’s are desperately trying to survive by absorbing smaller IFAs. Trying applying to a firm nowadays, all they are interested in is how many clients you can bring with you. Sorry, but if you can’t win your own clients in a free market you are not providing much of a service. 1% for SFA is outrageous. Just wait till fund supermarkets really get going and watch real market forces in action ! There will just be a few large IFAs left and then the mass market will be doing it themselves.

  4. Soren Lorenson 9th July 2013 at 9:18 am

    I’ll consider halving my fees when the FCA, FSCS, MAS & FOS halve theirs.

  5. Nicholas Pleasure 9th July 2013 at 9:21 am

    In support of this I am in no doubt that Deloitte’s work for a significantly lower fee when working for the FCA/FSA/FSCS,FOS,MAS.

    What’s that, they don’t…

    You mean they tell us to do one thing whilst simultaneously doing something to make our situation worse. Remarkable – or it would be if they weren’t one of the big blood sucking accountancy practices with their portfolio of nice, overpriced, taxpayer and IFA funded portfolios.

  6. How about the FCA halving their fees?

    MAS now focuses on the mass market!

  7. We will if you will Deloitte.

  8. As an experienced IFA and working with a number of firms I tend to agree with this. The volume of clients must increase and fees need to be reduced. It will mean working hard 5 days a week. I know some IFA’s find that a problem.

  9. This advice is precisely the opposite of what the regulator have been forcing through for the last 15 years. It is so amazingly ill informed and irrelevant that it barely warrants comment. And it certainly isn’t news!

  10. I fully expect this to be a roundly unpopular message. The way in which the report has been presented in this article combined with the present reputation of the authors lends itself to rightful castigation.
    That’s a shame though as buried in here is a salient message. If you haven’t yet got a proposition for HNW individuals that has been tested with actual clients and can be empirically demonstrated to be profitable, forget it. There are so many people rushing to that section of the market that you stand a very good chance of running into a large and expensive problem.
    Where there is a yawning gap is mass afluent / mass market. I would never suggest that someone halve their fees but I would point out that £500.00 for 3 hours work is much more profitable than £1000.00 for 10 hours work.
    With very careful, well thought out processes and application of relevant technology an advice firm could make a very nice living out of providing a streamlined, transactional service (probably on a restricted advice basis) to clients with less than £100k of investable assets.

  11. IFA’s cricising Deloitte for reccomending halving charges. I find it amazing that IFA’s don’t seem to understand the basics of business. Instead of working on a percentage of busines, why don’t they work on volume after all charging £1000 per client with no clients is a big “ZERO” income charging £500 per client, which
    Is more attractive

    to the client, having 2 clients is £1000 income.

  12. The reason that advice is not available to the mass market is because the FSA got it wrong with RDR. Accountants do not reduce their fees for anyone let alone the mass market which they do not practice in. To suggest cutting fees when FCA ,FCCS fees are rising is bloody stupid.. The time has come for the FCA to openly realise that the FSA were wrong in implementing the RDR and reverse some of the changes to bring reality back to the financial sector

  13. The reason FCA, FSCS, fees are so expensive is because they use the big 4 to do almost everything. The FCA, FSCS then send us the bill.
    It is not possible to halve fees when the cost of running an IFA business is spiralling out of control.
    Maybe Deloitte are getting worried that the advice market will cease to exist and their own income will dry up. Serves them right.

  14. An IFA I work for has already had to drop its fees from £200 to £175 ph as nobody is willing to pay them. Market forces in action and they are losing customers, or rather not winning them.

  15. Obviously Deloittes have not taken into consideration the considerable liabilities that IFA practises have compared to an accountancy practise.

    What I’m talking about is the ability of a client to sue an IFA for the advice given even 20-30 years later. It’s not very often I agree with Alan Lakey but this is something that does need to be discussed before IFA’s rush for the mass market.

    The FCA also needs to make rulings in connection with execution only models of doing business as some of these services are effectively giving advice in my humble opinion. So when we look at price comparisons of IFA services compared to non advice services we are not comparing like with like.

    I would disagree with Deloittes that advisers have to half their rates, in fact what IFA’s need to be concentrating on is providing high levels of customer service as price will always become secondary if the service is great.

    You only have to look at this in respects to mobile phones – Apple sell their latest device for £500 where in reality you can pick up a good phone for less than £200. Apple are able to sell at this price because they are selling not only a product but a successful brand. IFA’s need to do the same thing.

    Less concentration on products which some on here seem to feel is the primary function of IFA’s and more concentrating on the objectives and service levels of the client.

  16. Ross Glanfield 9th July 2013 at 10:00 am

    So Deloitte can afford to produce a patronising research paper lecturing another profession on the viability of their business model. Let’s hope for their sake this is not accountants in glass houses

  17. The main problem with this is the obvious one-if you halve your fees you need to double your volume to stay in the same place.

    I’ve always thought that the most important part of an IFA’s business is retention of existing clients and this boils down more often than not to the quality of service offered. Rule 1 (as it was once described to me): hold what you’ve got

  18. Halve the fees and double the number of clients.. Simples as the say.
    But since RDR the workload/admin process has increased by 30% plus totally out of proportion FCA, FSCS, FOS, PI increases.
    By the end of 2013 a lot more IFA’s will leave and the following year more will leave due to not having an additional £40000 to cover the increased cap add requirements.
    What a crappy situation to be in having done everything the various regulators have implemented over the years

  19. Halve your fees, double your volume, double your workload. Ever heard of work life balance Deloitte?
    IFAs’ do not have much of that at the moment, thanks to all the mind numbing, no benefit to anyone, tick box exercises they do at the moment.
    I am sure the people at Deloittes are used to a big fat pay cheque whether or not they have a heavy workload in any given period. After all, organisations like the FCA pay them carte blanche to ease their own workload.
    IFAs’ on the other hand have to earn every penny.
    In fact this job is becoming non viable, as it is very difficult to progress, due to the fact that the regulator demands we hand over most of our profits.
    Did anyone see a 16% rise in profits this year to cover the 16% fee rise the FCA require?

  20. What Deloitte is saying is that the HNW sector is a small portion of the total market. As such not all IFA’s can have a HNW client bank. For those that don’t have HNW clients and who wish to continue in business they will have to set their fees at a level which consumers are prepared to pay. Basic common sense really and nothing new.

  21. Dick Sprinkler 9th July 2013 at 11:29 am

    I wonder if a provider marketing allowance might help ?

  22. I couldn’t agree more. Adviser business models are typically extremely inefficient. Consequently (..and in my opinion a bit lazily) they charge the client more for their advice as opposed to concentrating on making their advice process more efficient.

    There is a fortune to be made for the person who is able to create a truly efficient adviser business model, as it will open up a largely untapped client base who previously thought financial advice was beyond them.

  23. For those without a HNWC bank, a lot have gone already, a lot more are leaving or wishing they could!

  24. Who Cares.

  25. I don’t think there is an arguement with the fact that the cost of financial advice should come down. Deloittes are rubbing their hands together in anticipation of collecting another huge fee for stating the obvious.

    What i would like to see is a FCA review into how much advice costs to provide. Unfortunately this isn’t going to happen because the FCA’s fees would be right up there as the main cost of providing advice.

    16% increase in fees, less advisers to pay it can only mean 1 thing. Cost of providing advice goes up and, obviously, so does the cost of getting advice.

  26. In many ways this report represents everything I despise about the assumptions Deloitte and the FCA make about many financial advisers. An obsession about product and costs with no recognition of the service, advice and value we offer, 24×7.
    As financial planners – note the word planners in this case – we are in a unique and sometimes frighteningly powerful position with our clients. Often we bring out of our clients extreme and emotional responses and by doing so develop a relationship which they may have with no-one else. It stems from the initial fact find stage when we do more than fill a form in which is what Deloitte suggest we outsource to clients! It is a prompt to ask tailored questions such as what if this happened to a loved one, why have you got that, what is the purpose of…? Each line in the fact find often prompts a further question and a detailed discussion which helps us to really understand our client’s feelings, values and financial objectives better. We probe and we disturb, if necessary bringing the coffin into the room and let the client smell the roses. It is the same with risk profiling – we ask, probe, test and reconfirm understanding of risk using personal examples if necessary.
    In the last few months on behalf of our clients we have been marriage and bereavement counsellors, serious illness support worker and even undertaken the role normally filled by the Samaritans. We gain trust, friendships – and further clients.
    This cannot be replaced by streamlined systems or computer based applications yet every day the FCA poops on us from a great height detached from what many of us do and driving us out, dispirited and demoralised, unable afford any longer to reach out to the mass market.
    Excuse Mr Computer, I need help? Is that the world we really want?

  27. Deloitte is reminding us of basic economics. If some advisors are struggling to make ends meet due to too few customers being prepared to pay its fees, it has 2 main choices:

    1. Reduce fees to increase demand for its services, or

    2. Improve/restructure its service

    There might also be a 3rd choice, which combines 1. and 2. Advisors could develop new propositions to appeal to different segments of customers. This might include “simple-advice” or “non-advice” propositions to win new customers who could later “graduate” to higher service propositions.

  28. The MAS is set up to give “advice” for “free”
    IFA’s are not in this situation,

  29. Brenda Mellor 9th July 2013 at 3:56 pm

    This article neatly ignores the niche market which IFAs can and should service profitably. It is neither High Net Worth nor Mass Market. It is the Mass Affluent – they are in need of advice and value face-to-face personal service and continuity of care.
    They will certainly not be able to halve their fees at a time when costs have risen dramatically but they can undercut Barclays Wealth!

  30. Did the FCA pay Deloittes to announce this because they are nervous about the advice gap THEY have created? and are, as usual, trying to lay the blame at the feet of advisers.

  31. Must? Must? Since when does a high priced number cruncher have the right to tell us what we must or mustn’t do?
    Why must we hear from these parasites, why does MM give them the air of publicity? The big 4 accountants are certainly no friends of ours.
    I’m not interested in the ‘mass market’ and why should I be. I work to make a living not to be a charity. As others have said I’ll bet your fees are way over anything most IFAs charge anyway.

    This is really a rather long response which should have been only 4 words – “Go boil your head”

  32. How many of those posting on here have read the report? If has less words than all the comments in here! Having read it, I agree with a lot of it’s points, but then that is what I am already trying to do. J do however also agree with Sam Caunt’s comments about why we cannot outsource KYC/fact finding, without missing out on on understanding (NYC) our clients and providing the service our clients vakuem which is as Sam describes.

  33. Julian Stevens 10th July 2013 at 8:45 am

    Advice costs cannot come down unless or until regulatory costs (and not just the levies we’re forced to pay) do so first..

    Has there been a single instance of the regulator identifying and taking action on something or other revealed in anybody’s GABRIEL Return? Or is it just data gathering for its own sake so that the regulator can claim to be keeping its finger on the pulse of what IFA’s are doing?

    Many IFA’s feel that they’re being drowned and strangled by regulatory processes and red tape. That’s why so many are quitting or laying their plans to do so at the earliest affordable opportunity.

    That aside, who really cares what Deloittes have to say on the matter? How much of our money did Deloittes bill the FSA for last year? People in glass houses shouldn’t throw stones.

  34. I couldn’t agree more with Sam Caunt. The whole drive to super-efficient, streamlined, impersonal “service” offered to clients on pile-em-high, flog-em-cheap basis is EXACTLY THE OPPOSITE to what I believe is the way forward! I offer highly personal, proactive face-to-face advice to clients who value this approach. If I am doing my job properly I cannot see more than 4 or 5 clients a week – and that is with extensive and experienced support staff! Cheap, quality independent financial advice simply does not and cannot co-exist with the current regulatory regime.

  35. RDR is sorting the wheat from the chaff and we have never been so busy, though we have also introduced a very competitive fee package to suit, the comments we hear from many of our new clients, are that many IFA’s out there who try to baffle the clients into submission into accepting high fee’s by over complicating the tasks in hand, easy money springs to mind. All we can say is keep it up, your pool of clients is getting smaller you can guess where they are going!

  36. Er maybe you should be telling the FCA that they need to stop paying themselves £86000, which is about 3 times the average take home pay in the uk, in bonus payments. That would make the cost of financial advice a lot cheaper.
    Parasites.

  37. Customer voice 13th July 2013 at 8:43 am

    Deloittes, don’t forget when you point your finger there are 3 pointing back at you. Why don’t you run low price sessions for us IFAs on how to lower fees and maintain profitability? Just a thought.

  38. Fully Informed 16th July 2013 at 9:41 am

    A lot of the comments on this issue boil down to vanity or greed. The IFA’s here want to be High Net Worth advisers eitherfor the bragging rights or naively think there are a never ending supply of these fortunate individuals whom they can feed off by providing generally on the shelf advice and calling it tailored. They need to wake up and get a proper business model.

  39. @ Fully Informed
    change your name by deed poll

  40. Terence P.O'Halloran 16th July 2013 at 2:06 pm

    Fee-PacTM will tell you all you need to know about running a profitable fee based business in the popular market because I did it for 30 years.

    Having said that: Deloittes and the establishment would do well to reflect on the fact that only 1% of the population earns over £101000 and salaries of £200,000 plus are totally unacceptable for the level of competence displayed by the regulator hierarchy.

    If anyone needs to ‘get real’ they do.

  41. In return for 40 years experience, hundreds of hours completing two Chartered qualifications and one Fellowship, I am now asked to advise on NEST for free and offer cut price services to those disenfranchised by the banks pulling out of giving advice, as if they ever did give proper advice.

    Was it all worth it I wonder? My loyal band of clients who pay for the service they want seem to think so, and I will continue to advise people like them, not super rich but with enough wealth for me to use my skills to make a difference.

  42. @ Terence
    well said
    They need to Get Real & Get Lost.
    Maybe all the HNW regulators are worried advice on where to put their mega buck salaries is going to cost them. It is not as if they would be capable of DIY.

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