How to advise less wealthy clients profitably

Olivia Bowen outlines the cash management service The Gæia Partnership is developing for clients who are not high net worth. Two other advisers describe the routes they are taking.

The issue

Olivia Bowen, director of The Gæia Partnership, is concerned that the Financial Services Authority (FSA) wants advisers to be wealth managers and is worried about the consequences this would have on clients who are not high net worth.

‘A major issue facing our industry and, we assume, an unintended consequence of the retail distribution review (RDR) is that the FSA appears to be encouraging IFAs to work solely as wealth managers,’ she says.

Wealth gap danger

‘The terms of RDR would seem to make it very challenging for IFAs to advise clients who are not wealthy. With only the wealthy receiving independent financial advice, they get wealthier and the social gap widens.’

‘We believe there will be negative, if not disastrous, consequences for both the economy and society from the combination of RDR and the disarray over government pension policy,’ she says. ‘Especially as there seem to be no coherent plans from either the government or the FSA about how the vast majority of UK citizens get sensible financial advice or pension planning.’

Technological aids

Bowen says The Gæia Partnership is looking into how technology can help. ‘We are considering how best to harness technology to provide solutions for our business and our clients in this category – for example, using wraps,’ she says.

‘We are also considering how best to streamline the advice process, maybe using decision trees, templates etc.

‘We would be grateful for any comments or solutions from our peers. What have you tried? What are you considering?’

Client cross subsidy

‘There has been some cross subsidy within our client bank – ie our wealthier clients have helped to cover the costs of advising lower net-worth clients,’ says Bowen. ‘We have often discussed this with our high-net-worth clients and they have been comfortable with this – they know that they are more fortunate than many citizens. ‘

Peer review

Roger Weeks