High net worth fixation misguided

Financial advisers scrambling to attract high net worth clients post-FOFA should re-think their approach to their service offering, according to an industry expert.

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by Aleks Vickovich - September 27, 2013 7 comments

As advice firms undergo FOFA implementation and move to a ‘fee for service’ model, many are looking to cater to high net worth (HNW) investors, including new entrant to the market, Hamilton Wealth Management, which laid out its segmentation plans in a statement this week.

However, Elixir Consulting managing director Sue Viskovic, who coaches financial advice firms on pricing and business model issues, says focusing purely on this client sub-set is a narrow approach to service proposition.

“Advisers should be selective with their clientele, and that’s about creating an offer that is absolutely suited to a certain market niche – but that in no way means it should be HNW clients or that is has to be HNW clients,” Ms Viskovic told ifa.

“HNW investors are not the only clients that will pay fees – there are all sorts of clients that are happy to pay for quality advice – it’s about finding that market niche.”

Elixir Consulting has found that many financial advisers only have a handful of clients that they truly engage with and have a strong relationship with, and recommends that advisers focus in on this segment of their client base.

“There’s a difference between clients and customers,” Ms Viskovic said. “The challenge for advisers is to really gain a handle on where their revenue is coming from and…move away from the legacy and trail commissions and not be dependent on them.”

In August, ifa reported that research conducted by financial services technology provider Worksorted suggested there is a discrepancy between the amount of revenue being generated by advice firms and “anecdotal evidence” about client revenue streams – with a large number of advisers reportedly claiming to cater to HNW clients in communications with licensees and platform providers.