Since consumer duty was implemented a year ago, 75 per cent of advisers have said supporting clients with smaller portfolios is increasingly challenging.
Research from Octopus Money revealed advisers are spending more time on paperwork which is putting pressure on profit margins and the ability to serve low-asset clients.
Some 35 per cent of advisers said the additional reporting requirements brought by the regulation has increased the administrative time spent per client, meaning the time required to deliver a single advice case has more than doubled.
To manage these demands, 36 per cent said they recruited additional staff, however the cost of hiring and training new employees has put pressure on profitability,
In order to demonstrate a commitment to value, 34 per cent of advisers said they had cut their fees, further putting a strain on revenue.
The survey also found 45 per cent of advisers have redirected their focus to onboarding clients with higher assets in the past 12 months, with another 45 per cent planning to do so.
Minimum asset thresholds have also increased by 12 per cent to £214,000 on average in the past year according to Octopus Money.
It also said, clients falling below this threshold face reduced support or being locked out of financial advice altogether.
The data showed that currently 26 per cent of advisers onboard these clients with a minimum fee, 21 per cent refer them to another service, 19 per cent offer a scaled down version of their services, while 18 per cent provide a one-off consultation.
Additionally, 12 per cent of advisers said they declined to take these clients on entirely.
Advisers have also made changes to their fee-structures with 38 per cent increasing fees for clients with smaller portfolios.
While 42 per cent have shifted to hourly billing and 45 per cent have introduced tiered charging.
Ruth Handcock, chief executive of Octopus Money said we were inevitably seeing a short-term tightening of advice availability rather than long-term innovations as a result of the regulation.
“Despite these initial, unintended consequences, I feel buoyed by the chance for a second wave of opportunity after this initial response. Innovation to serve clients and measure outcomes in new ways takes time, investment and collective action.
“As an industry, we have to foster an environment that enables everyone to adapt their service models to serve all clients effectively, regardless of their asset size.
“It will require creative thinking and implementation of new technology, alongside an openness to cultural transformation and partnership where firms aren’t solving the same problems in parallel.
“This open-source approach aligns with the spirit of consumer duty, but also ensures the long-term sustainability and growth of the sector for the good of every client.”
alina.khan@ft.com
