New research has revealed that financial advisers are finding it increasingly difficult to server clients with lower investable assets, a year on since the introduction of Consumer Duty rules.
Financial advisors are reporting that workloads are doubling and minimum fees increasing, with short-term tightening of advice availability rather than long-term innovation.
According to the research from Octopus Money, 54% of advisers’ clients books have under 100,000 of investible assets, on average, whilst 75% advisers say it is becoming increasingly challenging to support these smaller portfolios.
Since the introduction of Consumer Duty, financial advisers are spending more time on paperwork, which is placing pressure on profit margins and the ability to serve low-asset clients.
More than a third of advisers say there is increased administrative time required per client due to the additional reporting requirements. As a result, advisers indicate that the time required to deliver a single advice case has more than doubled.
Many companies (36%) are employing additional staff to manage these increase demands, which is further eating into profitability. Just over a third (34%) of advisers have also been cutting fees to align with Consumer Duty, adding to the strain on revenue.
The research suggest that the increased regulatory demands have had an unexpected impact on clients with lower assets. Almost half (45%) of financial advisers have shifted their focus to onboarding clients with higher assets in the past 12 months, with another 45% planning to do so, which could further reduce access to advice.
These findings share some similarities with a recent report by The Lang Cat, which found that since the arrival of Consumer Duty rules, the number of individuals receiving professional financial advice has decreased from 11% in 2023 to 9% in 2024.
The research also finds that minimum asset thresholds have increased by 12% to £214,000 on average in the last year. At present, one in four (26%) intermediaries onboard these clients with a minimum fee, whilst 21% refer them to another service, 19% offer scaled down services, and 18% provide a one-off consultation. As many as 12% decline to take on these types of clients.
These changes have also impacted fee-structures, creating additional issues for low-asset clients. Over a third (38%) have increased fees for clients with small portfolios, whilst 42% have moved over to hourly billing and 45% have introduced tiered charging, which creates a more complex and often more expensive situation for clients in this bracket.
