True Potential says financial advisers must achieve economies of scale if they are to prosper in a post-RDR world.
True Potential says its own research suggests there have been massive drops in fees and commissions collected post-RDR. Up-front or switch fees have dropped from around 3% to 1%, causing an estimated 60% overall drop in revenues.
The news follows reports that HSBC is the latest high-street bank to restructure its adviser arm, with 1,149 jobs reported to be at risk.
Earl Glasgow, senior partner at True Potential Wealth Management (a True Potential LLP company) urges advisers, especially current and ex-bank advisers, who may be considering abandoning ship to stand by the industry.
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He believes there is still a lot of business out there for advisers to capture and that it can be profitable with the right approach – ie admitting that the days of large fees are over, and finding ways to work with more clients, more efficiently.
“Advisers need to work in a different way because there’s no escaping the fact that the fees per investor have fallen. There is still money out there to be invested – most of it tied up in cash-based products – and by using the right tools, economies of scale can be achieved,” he said.
“Advisers need to find the right tools that will enable them to charge less to more people, along with the right business model and the right tools to enable them to service many more clients. They must find this flexibility to perhaps charge clients less and still make a profit – ‘charge a little from a lot’ – which will undoubtedly be the model moving forward.
“There are thousands of people with their money in ineffective products such as Cash ISAs, that often don’t beat inflation. A large education process has to take place to show consumers that there are superior alternatives available that can enable them to grow their wealth and save in a far more effective way.”
Glasgow added that fully-integrated platforms such as True Potential’s new V6 system can be beneficial from day one, significantly reducing data entry, bringing admin savings and most importantly offering a scalable servicing model. He said all of these are essential in the post-RDR world where margins are reduced and economies of scale need to be achieved.