Regulation is causing some advisers and wealth managers to de-risk retiring clients’ portfolios too soon whilst also steering certain investors away from valuable financial advice altogether, according to research by KPMG.
In a report released today, UK Wealth Management at the tipping point?, the firm says some advisers are playing “too safe” with their clients by focusing heavily on lower risk products. It also warns that a move towards self-direct investing, caused by the regulatory costs of advice, could be damaging to consumers.
The research sought the views of 41 chief executives within the wealth management industry and 300 ultra high-net worth clients along with data from research company Compeer.
The report says: “The focus on de-risking into retirement is reducing choice for many individuals and in some cases reducing the risk profile of their portfolios too soon.”
KPMG European head of investment management Tom Brown says: “Our research found that many financial advisers fear being punished by the regulator for misselling riskier products. As a result they may be over-cautious and inadvertently provide the wrong advice to some investors.
“At a time when the economy and Government need people to be building retirement pots, many everyday investors are being steered towards lower risk investment or are shunning financial advice altogether. Whilst lower risk strategies will be appropriate for many clients, there will be clients who are at a stage of life when they could be taking more risk with some of their investments.”
The report warns rising costs are discouraging investors from taking financial advice and clients are more likely to look at self-direct opportunities which are not necessarily in their best interests.
Brown says: “With £50 being the usual cap most people will pay, it is concerning that many everyday investors do not use or see the value of financial advice, and on the whole are unwilling to pay for it.
“As the onus is increasingly left to the individual to make provisions for their long-term savings, it is alarming people are likely to spend more on a plumber than on financial advice, which could set them up for retirement.”