Advisers are shifting their attention to more affluent clients amid fears the mass market will be unwilling to pay fees for advice post-RDR, research suggests.
A study carried out by CoreData Research polling 705 IFAs throughout May and June suggests advisers are either offloading non-fee paying clients or reducing the intake of new clients unable or unwilling to pay fees.
It found the number of advisers with a "tendency" to service mass-market clients has declined from over 31% last year to 27% this year. At the same time the number of advisers looking to service mass affluent clients has increased from 30% to nearly 36%.
The trend is being driven, in part, by hard-up investors either unwilling or unable to pay fees.
CoreData principal Craig Phillips says "very few" active investors would be prepared to pay more than 1% of their investable assets to access a platform and receive advice. Furthermore, a large proportion would be unwilling to pay more than 0.5% of their asset levels.
With CoreaData estimating an adviser needs around £2,500 per client to "economically justify" having them as a customer, advisers will therefore only be attracted to clients with between £250,000 and £500,000 of net disposable assets.
"This is a scary prospect," says Phillips. "Those high net worth or emerging high net worth clients with higher balances, on the other hand, are much more likely to pay for fee-based advice."
The increased focus on the upper-end of the market could also be explained by the exodus of advisers from the industry over the last 12 months who would likely have had more lower-end clients.
Phillips warns a bias towards more high net worth clients threatens to disenfranchise large segments of the investor community, creating "advice orphans".
"The phenomenon of advice orphans appears to be playing out already as advisers shift their focus to more affluent clients," he says. "This change could simply be the manifestation of a precursor to the seismic shift towards fee-based advice."
Regtech or fintech
Underperformance still present – for now
15% increase in number of claims paid
Open architecture philosophy
Inflation above 2% for first this this year