Pims 2009: advisers face integrity challenge, warns Kinder

I wonder what planet these guys are on.

As IFA's we have looked after our clients interests through all levels of income.

Unfortuneately (for clients) those on lower incomes are not viable to service.

We used to look after them because we felt that even though it was not profitable we wanted to help those who needed good advice. Due to increased regulation ( & costs) we can no longer afford to offer advice to those on lower incomes.

Middle income clients are now falling into the same category.

Regulation has been excellent for my business in financial terms as I have had to focus on profitablity (due to increased costs).Where before I was happy to accept some non profitable clients treating them as a sort of unofficial probono case I now cannot afford to not take these clients on.

So in a nutshell the authorities can regulate, impose conditions,increase costs etc but who benefits?

Not the clients unless they are high net worth (& if so they are probably well clued up & don't need protecting).

Probably the regulator & indirectly ourselves in a way that I thoroughly dislike.

Nick P is absolutely right. In an ideal world we would offer a service to those on "middle incomes".

There is just no way in reality that it is possible to give the time commitment required based upon a realistic charging structure. Even at £100 an hour someone earning £30,000 is highly unlikely to be prepared to write a cheque for £500 a year

for advice - and five hours would never be enough to properly advise and service a typical client even of more modest means !

We have had no alternative other than to be HNW focused. The fact that the FSA continues to allow the banks to describe product sellling as advice only perpetuates the general view that financial advice does not need to be payed for.

Providing genuinely holistic advice based upon a real understanding of a client's needs and attitude to investment risk is a massively time consuming task.

As Nick says, in many ways regulation has improved the prospects for independent advisers, but the trend proposed by the RDR and the end of cross subsidy is unlikely to be of any benefit to the middle and lower income groups.

George Kinder would do well to spend a few weeks understanding the complexity of advising UK clients in the current regulatory environment before he next lecture tour.

The majority of my clients earn between 30k and £75 per annum, I have a few above the upper level and several mainly GPP (customers not client) members below that.

My earning expectations are similar to my clients (not my turnover which is higher by neccesity to meet regulatory costs, office costs and teh four part-time administrators I have due to the weight of paper generated by working in the middle ground and not HNW arena).

Having had our FSA TCF visit on Monday, my office manager and I were discussing whetehr we should move to charging all clients an annual retainer, or a committment fee when they engage is, neither of which we do not at present. WE don't do ANY pro bono work as whilst we do discuss issues with enquiries for free, I do not believe anything should be at nil cost otherwise it is not valued and whatever anyone says at the F-pack, no offer and acceptance (i.e. money passing hands) NO contract or liability is accepted.

Our conclusion was that all the time I am the only adviser, this is not necessary, however, the moment we take on advisers in the firm again (we downsized slightly), then there is no point me taking the risk of employing other advisers if I am not taking some kind of reward for the extra risk I am assuming.

QED we will continue much as we are until we see a clear path post RDIP and perhaps removal of the lifetime of liability in view of the ignornace of Longstop etc on the part of the F-pack. If they sort both these out, then we will invest and expand again with a view to operating an IFA model which will serve middle earners.

I actually agree with what has been implied in Mr Kinder's statement above i.e. if Planners DON'T engage with middle earners, they will be seen as elitist. One way around this may be to seperate the non regulated discussions and charges from the regulated as a lot of what clients actually want, seems to me to be the nonregulated hand holding of their finances.

Maybe those advisers who do not feel they can make a living in the middle incomes would be happy to pass the clients onto ones that feel they can.

There are plenty of advisers who can provide a service that middle income earners want and make a profit, albeit not a large profit margin, but still a profit.

I am thinking of advisers that are in the early stages of there career, or those setting up their own business for the first time.

I treat all potential clients as possible pots of gold as you do not know who they may know who is a higher earner, or has a pension pot worth say £200k, or a large mortgage and needs family protection.

I offer the client the best fee option or commission route that suits their circumstances and that they see value for. As it is my business I can negotiate with them and agree a fair price. I have few overheads as I work from home, and make as much use of electronic solutions as I can.

So any advisers who have clients or prospects in the North Oxfordshire, Bucks, or Northants area I am open to discussions.