Am I too ‘poor’ to get financial advice?
Since the financial regulation overhaul known as the Retail Distribution Review (RDR) came into force at the end of 2012, financial advisers have not been able to accept commission from providers. Instead they have had to give clients details of fees upfront and in advance.
While RDR was implemented to improve transparency and standards for both clients and advisers, there are suggestions the increased regulation has actually had negative effects, including creating a significant number of ‘orphan clients’ – those who may not be able to afford or are unwilling to pay for advice.
But the stricter regulation has also made it difficult for some advisers to keep certain clients with lower levels of wealth.
Karen Barrett, chief executive of Unbiased, a directory of advisers, says: “Advice seeking is rising due to pension freedoms, which may put pressure on the lists of the limited number of advisers. Unfortunately, some advisers may be forced to limit their lists to their wealthiest clients.”
While there’s no magic figure on what savings or wealth you need to have in order to gain financial advice, Barrett says it becomes harder to offer financial advice of value to people with assets under £30,000, but much depends on the client’s long-term plans.
“The good news is that there are many, many different IFAs, all with different business models,” she says.
“So even if one IFA has to turn you down, another in the next street may still be able to offer you a value-for-money service. The old clichés about dating certainly apply: there are plenty more fish in the sea, and if you keep looking, the chances are you will find someone who’s ideal.”
Simon Webster, managing director of Facts and Figures Chartered Financial Planners, says aside from transactional clients, one of the reasons an adviser might ‘drop’ a client is if the client is no longer financially viable to the adviser.
“Not financially viable could cover: not enough fee for the work required, not enough or too much specialist knowledge required, or change of adviser business model, or loss of a key staff member – but all of them come down to the ‘not viable’,” he says.
Scott Gallacher, director at Rowley Turton Private Wealth Management, says he can see the business decision if a client is no longer profitable but says his company won’t dump clients if they’re not profitable.
However, the firm will only take on clients with a minimum of £100,000 of assets.
“It’s difficult to charge that client and add value if they have £10,000 in their pot and they may find it’s better not paying for advice but saving what they can,” he says.
Mark Dean Wealth Management has around 30 clients and £40m under management so all their customers have over £1m in assets. Dean Mullaly, managing director of the firm, says RDR may be slightly to blame for clients falling outside of adviser minimum thresholds.
“Before RDR, advisers were able to refuse to deal with some clients but RDR has increased awareness to advisory firms that they have the ability to say no.
“The main driver of that was the segmentation of assets into gold, silver or bronze customers so it really made advisory firms start to think about their business and RDR has created its own problem.
“In the past, advisers would have dealt with not cost-effective clients.”
Where to turn for financial advice
Whether you have under £30,000 or a healthy six digit figure of assets, there are options available for you whether you pay for advice, get free advice or simply want some guidance rather than regulated advice.
If you’re looking to get independent financial advice, websites such as Unbiased and VouchedFor allow you to find whole-of-market financial advisers. See YourMoney.com’s guide on key points to consider when looking for financial advice.
If you’re specifically looking for pension advice, you can try Pension Wise, the free government-backed service set up to help people understand and navigate the pension freedom rules.
The service is available over the phone or face-to-face and offers impartial guidance – it won’t recommend any products or tell you what to do with your money though.
The Pensions Advisory Service is a voluntary organisation that provides information (guidance rather than advice) about pensions, including how to save into a scheme, what to do when things change and what your retirement choices are. It can also help you make a complaint about your pension.
The Money Advice Service was set up by the government in 2010 to give free and impartial information on debt, borrowing, pensions and retirement. It’s due to be scrapped, along with the Pensions Advisory Service (TPAS) and Pension Wise, and replaced by a smaller, single body, though further details are to be confirmed.
From April 2017, the Pensions Advice Allowance is due to come into force, allowing consumers of any age planning their retirement to take up to £500 from their pension pots tax-free (in three separate tax-years so £1,500 total) to put towards advice. It’s available to holders of defined contribution pensions (DC schemes) and hybrid pensions with a DC element, though it won’t be available for defined benefit (DB) or final salary-type schemes.
If you’re considering opting out of a defined benefit pension scheme into a defined contribution scheme, the rules stipulate that those with a DB pension value of over £30,000 will need to take regulated advice before transferring to a DC scheme.
You can go to Citizens Advice for help with debt, housing, welfare and employment issues. Its advice is free and impartial and delivered face-to-face at one of its 3,500 bureaux, over the phone or via email.
Age UK also has advice services aimed at those aged over 50. There’s also TaxHelp for Older People, an independent and free tax advice service for older people on low incomes who can’t afford professional advice.