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How can wealth managers conquer the execution-only market?
by Annabelle Williams on Jan 23, 2013 at 10:22
With the retail distribution review (RDR) now in force, a growing number of wealth managers are looking to attract less wealthy clients through direct offerings, but can they compete with the incumbents?
Estimates of the scale of the ‘advice gap’ vary. Consultancy firm Deloitte believes there are now
5.5 million people who are unable or unwilling to pay for advice.
Jonathan Fry, whose eponymous wealth boutique launched an execution-only service in the summer of 2011, says his firm wanted to offer clients the option to implement their own investment ideas.
However, he believes firms that are launching execution-only to gain a presence in the direct-to-consumer market face a huge challenge.
‘Smaller wealth management firms should be under no illusions as to how difficult it is to make an impact and make money out of execution-only and guided advice,’ Fry said. ‘There are some big players in the market – for example, AXA, Barclays Stockbrokers and TD Waterhouse.
‘These big players have market capability and are investing a significant amount of money in delivering something that is both competitive and functional with well-presented web-based services. Most wealth management firms who focus on personal relationships and face-to-face advice are going to struggle to get near to emulating this.
‘For us, the challenge was we recognised that high net worth clients may wish to implement their own investment ideas on a competitive basis.’
Brian Dennehy, founder of FundExpert, says that for new entrants, trying to compete on price with the likes of Hargreaves Lansdown is ‘frankly pointless’.
‘All of the [businesses] that are coming in want to compete on price,’ he said. ‘Hargreaves Lansdown has already got that corner of the market on scale and no-one else could spend what they need to on sales and marketing to even begin to compete. Anyone else with non-advisory business needs to have a unique selling point.’
The sheer scale of the challenge facing newer entrants is echoed by David Loudon, managing partner at Redmayne-Bentley, which has a long-established execution-only service.
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