Don't ditch C and D financial advice clients: Russell
Financial advisers looking to sell books of lower value clients due to Future of Financial Advice changes should first look at other options such as reducing the cost of delivery, according to Russell Investments.
These clients can make up a large proportion of many client books and the cost of acquisition alone suggests financial advisers should do everything they can to provide more services to lower value clients before considering alternatives, according to Russell's practice development manager, John Nolan.
Traditionally many lower balance clients have been serviced through out-dated and expensive legacy products and subsidised by higher balance clients - but due to changes such as fee disclosure and opt-in many financial advisers are looking at selling or forsaking these segments to focus on more profitable clients, according to Russell.
But Nolan said financial advisers should "consider a 'move up' strategy before implementing the 'move out' approach."
For clients not interested in a broader service offering, financial advisers should look to reduce the cost of maintaining these client relationships, he said.
"All the advisers I talk to want to do the right thing by their clients, but the relationship has to be a profitable one. If there's no junior adviser in the office to look after lower value clients and no other way to reduce the cost to serve, then naturally the focus should turn to the cost of delivery - specifically product fees," he said.
Russell said its SuperSolution Master Trust Private Division provides an alternative option for managing low value clients in a post-FOFA environment, with administrative services including ongoing investor communications starting from 45 basis points plus investor fee. This frees up the financial adviser to focus on high value clients while still offering fee-for-service advice to lower value clients, Russell said.
Recommended for you
As the year draws to a close, a new report has explored the key trends and areas of focus for financial advisers over the last 12 months.
Assured Support explores five tips to help financial advisers embed compliance into the heart of their business, with 2025 set to see further regulatory change.
David Sipina has been sentenced to three years under an intensive correction order for his role in the unlicensed Courtenay House financial services.
As AFSLs endeavour to meet their breach reporting obligations, a legal expert has emphasised why robust documentation will prove fruitful, particularly in the face of potential regulatory investigations.
