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How wealth managers are responding to FCA's advice gap call to arms
by James Phillipps on Oct 23, 2013 at 13:34
Financial Conduct Authority (FCA) chairman John Griffith-Jones called on wealth managers to innovate in order to help close the advice gap that has emerged following the retail distribution review (RDR).
Speaking at the Wealth Management Association’s annual conference earlier this month, Griffith-Jones said the regulator continues to monitor the ability of less affluent consumers’ ability to access advice. He said the regulator would be interested in the potential solutions wealth managers can come up with to bridge this.
‘Yes, there may be side effects or unintended consequences and over the coming months we at the FCA will monitor developments in the market extremely closely,’ he said.
‘In particular we are alert to the advice gap issue and are actually very interested to see where you, as part of a very competitive market place, go for new solutions that might meet the advice gap customer needs.’
However, at the same time Griffith-Jones (pictured) warned that issues of suitability and the blurring of the boundaries between execution-only and advice remain firmly on the regulator’s radar. This is the very reason why many wealth firms have pulled back from servicing smaller clients.
Indeed, Barclays recently announced it was withdrawing discretionary management for direct clients with less than £100,000. However, the bank is hoping to target the direct-to-consumer market with a broader proposition called Barclays Wealth Direct.
Meanwhile, Sanlam Private Investment’s newly launched investment service, which aims to sit between the advisory and discretionary worlds, has a minimum of £250,000. Not exactly what Griffith-Jones was hoping for.
That said, a number of players are targeting smaller clients, predominantly through online propositions.
Targeting smaller clients
Peter Hall, chief executive of Bestinvest, has been actively targeting this market. Last year, the firm offered a free portfolio investment review, which more than 35,000 people have taken up. It has also relaunched its online investment service, which offers a blend of advisory and execution-only.
‘The online service is trying to help clients who have either been abandoned by advisers, for example by bank advisers exiting, or clients who are abandoning their adviser because they don’t want to pay a fee,’ Hall said.
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