Cofunds’ Pemberton: Re-engage with clients ahead of sunset deadline

Liz Pemberton

From April 2016, investment platforms will no longer be able to accept payments from a fund’s annual management charge and therefore must move to an explicit platform charge – a side-effect of which is effectively the switching-off of any remaining trail commission for all platform-based advised business. 

As an adviser, the significance of the 2016 sunset deadline depends on how much of your existing business is still commission-based. If most of your clients are affirmed to pay explicit fees for service, it should be a minor issue to move remaining clients over. If, however, a significant part of your income still comes from trail commission, urgent action is required to ensure you don’t suffer a significant revenue shock.  

Transitioning clients’ investments to a fee-based model can be challenging and time consuming.  It may also seem daunting to try to persuade someone, with whom you may not have interacted for years, to consider your fee-based service. 

Communication is key

Explaining why your method of charging needs to change is, of course, the first step. But there are other factors to consider in order for any communication to really resonate. Here are some suggestions: 

  • Consider their lifestage. Work out a client’s current age and consider what financial issues and concerns may be most relevant to them. Are they likely to be thinking about school fees, retirement or income for later life? Are the new ISA allowance or DC pension freedoms relevant? Tailor a communication that’s most likely to strike a chord with what could be important to them now. 
  • Inspire with what you can provide. Alongside outlining your new fee structure, explain in detail what you can offer in return – in terms of service, reporting, online tools and investment solutions. It’s easy to assume that clients haven’t been in contact because they don’t want your services. Often, they may have just been too busy to think about what you could offer. 
  • Tailor your offering to the client’s level of assets. If a legacy client only has £8,000 in ISAs with you, it’s unlikely they’ll be interested in a service that’s going to cost £1,000 a year in fees. Can you offer the option of a light-touch advised or self-directed solution instead? Think creatively about charging models that appeal to different client groups. Also, make it easy for them to consolidate other assets with you to make your fees economically worthwhile. 
  • Make it easy and simple for them. For many investors, the prospect of having to move assets elsewhere is a headache. So make it easy for existing clients to affirm agreement to your new fee model and switch to commission-free share classes – for example, by providing populated documentation and a freepost envelope. 
  • Prepare to be surprised. It’s easy to assume that the most positive reaction will be from clients with whom you had the strongest relationship. But responses can be surprising. One adviser tells of a client with whom he felt he had a very weak relationship and he anticipated that switching from commission to fees would see the client disappear for good. Instead the client rang up delighted, saying it meant he felt he could call for support without the pressure to transact a product. 

Re-engagement with long-lost clients can take time and a few attempts. So be inspired to start re-engaging now – it could be the start of some mutually rewarding new client relationships. 

Liz Pemberton is head of platform consultancy at Cofunds.