Cofunds’ Coleman: Advisers and the future of the self-directed model

Specialist Lending

The question ‘how will you manage clients that are no longer commercially viable to receive your full service?’ was put to advisers as part of a wider BNY Mellon and Cass Business School white paper. Six per cent of respondents said they’d look to offer research support and guide clients to a D2C service.

Now if the D2C service in question was modelled along Nutmeg or Hargreaves lines then I can understand why that figure is so low. But, and this is a big but, if not then something is very wrong here. Especially when you consider that 16 per cent of advisers in response to that same question said that they’d outsource the client to another adviser.

Without a doubt, most adviser firms provide a recognised, valuable offer to HNW clients. But ask yourself this, where are the HNW clients of the future going to come from?

I firmly believe that constructing an offer to serve the self-directed segment of an existing IFA customer base provides an opportunity to build a long-term sustainable business model for financial advisers, and I don’t mean the likes of Nutmeg and Hargreaves.

I mean instead the type of self-directed model which complements the existing HNW model, one that acts as an extension of the adviser’s own business, and one that uses the adviser’s own branding. A self-directed service modelled along those lines enables advisers to maintain a relationship and a value exchange with clients with more modest portfolios but, crucially, provides the means to cultivate the HNW clients of the future.

This self-directed model keeps the adviser firm front of mind for the time that the inevitable happens and the client either through a life event or their portfolio growing over the years reaches the point that they need full advice.

So rather than running the risk of losing business by embracing self-directed, they will be helping to build long-term value in their firm by cost-effectively tending to the clients of the future.

Six months on from the introduction of the RDR, and self-directed services are gaining ground but if the BNY Mellon and Cass Business School adviser survey is to be believed it’s not yet nearly reached the levels at which it can be force for good for adviser firms.

If you’re interested, the biggest response to that question, with 69 per cent of respondents saying this was their preferred course of action, was to ‘retain on books and stay in contact via, say newsletters, while retaining trail commission as long as appropriate’. Make of that what you will.

Andy Coleman is director of distribution at Cofunds