Customers with investments of less than £50,000 are increasingly being turned away by their financial advisers. In 2014 just under a quarter of financial advisers showed customers with this level of assets the door, whereas in 2017 this figure rose to one in two advisers, according to new research by Schroders.
In total, one in four financial advisers asked clients to leave their practice in 2017 for not having enough money.
The research, based on a survey of 250 financial advisers, showed that the number of clients that advisers are no longer choosing to service has steadily grown over the past few years, from less than 20 per cent in 2014 to a quarter in 2017.
The findings raise further concerns about an ‘advice gap’ – a growing amount of the public going without adequate financial advice for managing their savings.
This growing gap was recently acknowledged by FCA chief executive Andrew Bailey at a speech at Mansion House.
Rule changes in 2012, known as the Retail Distribution Review, have inadvertently contributed to the advice gap. The new rules banned the paying of commission to financial advisers by fund managers and instead required advisers to charge their customers explicitly.
This meant that for many advisers, clients with smaller assets were no longer deemed profitable enough to service.
The commission ban, however, has not been the only factor in the growing financial advice gap.
According James Rainbow, co-head of UK intermediary at Schroders, it is also part of a longer-term trend. Over the past few years, he pointed out, the number of financial advisers in the UK has steadily declined. At the same time, he notes, the demand for their service has increased, particularly with the growth of personal pensions, thanks to the pension freedoms.
‘It is a labour-intensive process. There is only a certain number of clients’ financial advisers can provide regular service to,’ he said.
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