Almost two-thirds of advisers have warned that the RDR will not make it profitable to service clients with less than £50,000 in liquid assets, research from Allianz Global Investors has found.
According to the fund manager, 60 per cent of advisers surveyed said clients that sit with them would lose out or have to pay more for full time financial advice when the RDR comes into force on 31 December, 2012.
The survey, which covered 166 IFAs, also found that 60 per cent of advisers also said changes to the way they service clients will become inevitable, with 36 per cent planning to reduce service levels to smaller clients. 16 per cent say they will turn away clients that are too small and 6 per cent remain undecided about how to service such clients.
Around 14 per cent said they have already made changes to their charging structure to keep their small client base. This has been done by increasing rates, through percentage of assets, flat fees or charging an hourly rate for their time. 13 per cent of advisers plan to continue servicing small clients with same level of service even if the move is loss making.
Allianz Global Investors head of European retail sales (ex Germany) Nick Smith (pictured) says: “The RDR code, established to provide resilient, effective and transparent retirement and investment planning for the retail investment market, has attracted significant attention since its formation, yet the potential fallout, both advisory and financially, for smaller clients has largely gone unnoticed. Furthermore, this survey has to lead to questions about the sustainability of some advisory companies in the future.
“Our research indicates investors with less than £50,000 in assets will have decreased service levels or worse still, be left with no professional advice. Therefore, we believe it is time for advisers and the providers to look towards a solution to this challenge.”