By partnering with Morningstar Wealth Platform, Aisa International can now explore opportunities in the US market beyond self-invested personal pension (Sipp) propositions.

Max Durrant, executive director at OpesFidelio, said: “I am really pleased to announce that we have recently entered terms of business with Morningstar Wealth Platform to complement our other offerings.

“This now makes OpesFidelio unique in the offshore community in terms of the range of platform and bond offerings and also allows us to now consider the US market for more than just Sipp propositions.”

Individual savings accounts

Morningstar’s ability to offer individual savings accounts (Isas) that can be managed while clients are offshore is a “significant advantage” for Aisa International’s OpesFidelio advisers and their expat clients, the firm said.

Chris Lean, investment director of Aisa International, said: “We’re thrilled about this partnership because many expatriates are often misguided, believing they should sell their Isas when leaving the UK due to the inability to contribute.

“However, I would clarify that individuals can retain their Isas, even if they cannot contribute – the assets within ISAs can be managed, and if clients return to the UK, they can resume contributions, making this a valuable win-win situation for both clients and advisers.”

The portfolios have been designed and constructed by LGT’s sustainable model portfolio committee and are available to Aisa’ s OpesFidelio network of advisers from April 2023.

They are comprised of three risk-rated portfolios, which have three risk targets assigned to each and are available in euro, US dollars and British sterling.

The sustainable model portfolios are based on, and named for, clients’ risk appetites including cautious, balanced or adventurous.

Chris Lean, investment director of Aisa International, said: The new sustainable model portfolios address European investors’ desire to invest in and support environmentally and socially responsible businesses, while generating capital growth according to their risk tolerance.”

Max Durrant, executive director of OpesFidelio, added: “This is a much-welcomed addition to our model investment offerings for members’ clients to have access to, and we feel confident that LGT is the ideal partner in the sustainable world of investments and one which we are extremely proud to partner with. This is a significant development that will only add to the overall client experience of our services and the value it represents.”

But it closed the year 8% lower due to market struggle and consumer confidence falling.

The research also found that the number of user accounts continues to grow and has hit an all-time high of 9.54 million accounts, up from 5.7 million in Q4 2019.

The rise of DIY investors begs the question – can advice firms take them on as clients or is it too unfeasible?

Strained relations

Phil Billingham, director of Perceptive Planning, said: “The potential is to take the DIY investors on via a fee retainer basis. Unfortunately, the platforms do their very best to make that extremely difficult.

“In an ideal world, planners and advisers would be these platforms’ best friends because we could be diverting a lot of money to them with smaller clients, where we just do some planning, and they can do their own investing.

“In reality, they refuse to deal with us, which leaves the smaller investors without advice, because they don’t get any help from the platform. They are in a difficult position.

“Some of the DIY investors do very well, build up funds, and then either something goes wrong, and they get scared and jump to cash, or they put too much money into one sector and suffer. Then they realise that perhaps there is more to this than meets the eye and they get some proper advice.

“We take clients on when they reach a certain size and it gets scary, and they don’t want to make mistakes. But I think the short answer is, it should be simpler for advisers, clients and DIY platforms to work together – but the DIY platforms don’t want to do it.”

Planning more of an issue

The technical support of an adviser can come in all shapes and forms e.g. estate planning, inheritance tax and trusts. This is likely to catch the eye of a DIY investor than investment help.

Billingham added: “I think the truth is a lot of them do have assets that if they wanted to be looked after by planners, they would be cost effective. I don’t think that size is necessarily the only barrier here. I think it is a perception of value. It’s also about complexity.

“In some ways, I agree with the clients. If they’ve got £200,000 in a ISA and all they are doing is topping up their ISA into a very boring 60/40 fund, then I would agree with a lot of them that there is no reason for them to have an ongoing adviser.

“They might need a planner to look after the rest of their financial affairs e.g. children, property and assets. But the investment might be very straightforward. The truth is these people are pretty invisible from an advisory point of view, they have chosen not to engage with the adviser and planning profession for whatever reason.

“What we see is that people then choose to engage with us as planners, when a point of complexity hits their life, for example, suddenly coming to retirement, and they’ve suddenly got other pots, income streams and how to manage decumulation. They then ask for help. It tends to be at that point, but it’s very difficult otherwise.

“If somebody’s only got £50,000 in two funds and they’re putting £50 a month into that, then they don’t really need to pay somebody a lot of money just to do the same thing.”

Chris Lean, director at Aisa International, added: “I am not sure many advice firms would want to take on a lot of DIY investors. I also wonder why DIY investors would want to start using an advice firm- other than those who perhaps realise that they could be better off handing over the responsibility to appropriately qualified advisers.

“Firstly, an investment adviser needs to be allowed to choose and recommend funds going forward. I suspect a lot of DIY clients may have different opinions on the recommended funds, which is fine, but this may then lead to time consuming discussions with the client and may tie the hands of the new adviser.

“Also, many DIY investors are extremely price conscious and do not differentiate between cost and value. The value that a professional advice firm provides. Therefore, many are not likely to accept ongoing advice fees or be willing to pay them.”

Helping hand

But DIY investors may understand what they want to do but the execution of how they approach the market may end up being flawed.

Professionals have expertise which can be helpful for DIY investors, who get scared during market turmoil and close their account to “jump to cash”.

Paul Surguy, head of investment management at Kingswood, said: “We have many concerns on behalf of DIY investors. First is the risk element. Building a portfolio that will not only generate long-term returns but also avoids large losses involves assessing the true risk an investor is willing to take and matching the portfolio to that level of risk.

“Second is that the trend is not always your friend. Many DIY investors will invest in assets or regions that have performed well recently; couple this with point one and portfolios can become very skewed.

“Then there is time. Professional investors spend all day, and night on occasion, selecting the best assets and setting the most efficient asset allocation, and then adjusting this when things change. DIY investors often do not have the time to do this, in addition to their day job.

“Finally, the ability to remove human emotion from investing is hard enough for professional investors, let alone DIY individuals who are more likely to be caught up in short-term noise.”

EU financial services chief Mairead McGuinness is set to unveil her ‘retail investment strategy’ to attract more retail investors into capital markets.

But according to Reuters, the strategy will include a potential ban on commissions for financial advisers distributing banks’ and insurers’ products.

McGuinness believes this would lead to cheaper products for customers, citing the examples of the UK and the Netherlands, where commissions are banned. She explained that products where commission is paid are, on average, 35% more expensive than those without commission.

But Markus Faber, a senior member of the European Parliament, told the financial services chief that the move could cause a fundamental shift in the banking business models since most retail customers in the bloc access financial advice mostly via banks and insurance companies.

The “inducements” paid for the sale of financial products also fund the widespread non-independent advice model in several of the member states.

Distribution

Germany echoed this, with finance minister Christian Lindner stating the move would create a “serious setback” for the EU’s capital markets and it would actually limit choice for consumers.

He added that, in Germany, commission-based selling is the predominant system when accessing financial advice and that a ban would work against that model and inhibit access for consumers.

Lindner continued that the current EU regulation on inducements is already “well balanced and forces investment firms to act in the best interest of their clients”.

Several banking and insurance industry bodies sided with Lindner on the move.

David Vacani, principal at Beacon Global Wealth Management, told International Adviser: “The main issue is that there are major institutions in Germany, as in France for example, where big banks and insurance companies largely control the distribution of financial planning products.

“I would suggest there is significant vested interest in commission-paying products to the banks and insurers. That is very much the case in France.

“Clearly the EU’s direction of travel is ideally towards adviser fee and a clarity of charges for investments and financial planning rather than just a product sale, but some of these big institutions will fight to maintain their commission-paying products I expect.

“In the UK post-RDR there has been a significant improvement in the costings of investment products and this has given significant benefits for clients with clarity of fees and advice.”

Affordability

Chris Lean, director and financial planner at Aisa International, told IA: “While we operate on an adviser charging fee basis in the same way as the UK, most people in the EU rely on banks and insurance companies to provide advice on insurance and savings.

“I would agree with Christian Lindner as it would restrict access to advice for many that are not used to paying fees in the same way as they would for other professional services. For me, the issue is not the commission payments themselves, it is more about transparency and investors being able to understand and agree to the amount of incentive and whether it is reasonable given the sums invested, the advice given, and the work involved.

“In places like the UK, where commission was banned some time ago, there is an ever-increasing ‘advice gap’ developing between those that are willing and able to pay fees separately and the rest. While the ban has resulted in better priced products, this is only really benefitting those that can afford the advice.”

Traditionally, IFAs use referrals as a source of attracting new clients. But in the new age world of social media and technology – advisers can reach out to many people and families they never stood a chance of reaching.

However, according to a recent survey by Charles Stanley – there are some Brits who could be too unattainable for IFAs to get as clients.

Just over half (52%) of UK adults said they’ve spoken to a financial adviser before, while 48% have not. Some 16% have spoken to one in the last six months.

Of those who had never spoken to a financial adviser, more than half (53%) don’t think anything would ever prompt them to do so. This is truer for men (62%) than women (45%).

When asked to think about financial advice more broadly, most UK adults (24%) said that they only want advice when they feel they need it, and 12% would like specific advice, but only on certain topics – this is higher for those with experience of advice (17%) than those without (5%).

Understanding

Sarah Lord, chief client officer of Cooper Parry Wealth, said to International Adviser: “I don’t believe advice stubborn clients are too unattainable for IFA’s – as the results of the survey show, many individuals do not understand what to seek advice on, this is in my opinion because individuals are not clear as to how advice will benefit them.

“Therefore, for advisers to reach these individuals the key is being able to demonstrate the benefits that seeking financial advice can have on their overall financial position whether that is by having a more tax efficient approach, being clear on their financial goals and objectives or having a plan in place that gives them financial confidence.

“It is interesting that the survey results indicate that a good proportion of individuals would seek advice as a one-off event, this demonstrates that there is still some way to go to raise awareness to potential clients that for the majority, financial advice and financial planning should be an ongoing journey and dialogue with their adviser so that they continue to manage their finances in the most effective way as their life evolves, rather than a one off event.”

James Pearcy-Caldwell, chief executive of Aisa International, added: “Whilst financial advisers and planners recognise the value of financial advice to most people, we also recognise as businesses that not everyone can afford what we offer. The problem is more exacerbated due to the ban on commissions meaning people have to pay for advice, whereas 20 years ago they could be given a simple product and that is probably true of many people nowadays.”

Trigger events and trust

The survey also found that the top reasons unadvised people would take advice on.

Winning the lottery (27%), receiving an inheritance (15%), being offered low-cost advice (10%) and being able to meet them once or twice with no commitment (9%) were the top answers.

Setul Mehta, head of business development and adviser services at The Openwork Partnership, said: “It’s positive to see that clients do understand the need to seek financial advice when coming into an inheritance or a lottery win. Essentially, how they should deal with an influx of money. This means individuals aren’t just keeping their money in the bank and losing out against inflation, or potentially allocating to unsuitable non-regulated financial assets.

“The research demonstrates that it is often a ‘trigger’ event that will lead a client to act. In this sense, it demonstrates that clients are certainly attainable, and the advice gap can be tackled.”

Martin Cotter, managing director of Lumin Wealth, added: “For the unadvised consumer – and by this we typically mean those who have never sought financial advice – the hardest barrier to overcome is trust in the industry. Trust is intrinsically linked to ethical behaviour. When delivering a transparent, cost-effective and personalised service for clients, trust inevitably flourishes.

“Complimentary initial meetings are an excellent way of breaking down the trust barrier for advice-shy clients and gaining a quick overview of client needs and potential solutions. As a sector we can do more to promote the fact that consumers have nothing to lose by getting in touch and meeting with a financial adviser. A no-obligation meeting is a chance to showcase how a clear financial plan can provide significant and long-term value.

“Once a prospective client understands that this is an easy step to make, and that having a clear financial plan is beneficial in numerous ways, then this goes a long way towards building both trust and confidence.”

Financial education

The 2,000 person Charles Stanley survey also found that of those who have spoken to a financial adviser before, 67% had a good experience. Just 6% had an actively negative one, while 27% were neutral.

This statistic highlights that once people get advice there understand the benefits and are mostly happy with their adviser. But how does the UK and the financial advice industry get more to know about the value of advice?

Steve Thompson, partner at GSB Capital, said: “I believe that our main focus should be on the younger generation and education. As advisers we often call for better financial education at school level, where equipping children with financial literacy skills could make such a significant long-term difference to their lives. What’s more, aiming for a basic level of financial education from childhood would also surely bring benefits at a society level.

“Until financial education finds its way onto the curriculum, I think those of us within the financial advice industry have an obligation to think about how we can contribute to increasing the level of financial education in children and young people.

Matt Hammond, chief executive at Navigation Wealth Management, said: “The advice gap is a real challenge. With the majority of high street banks removing financial advice from their proposition following the retail distribution review (RDR) in 2012, many clients don’t know where to turn.

“Financial advice can still be deemed to be for the wealthy, and this causes serious issues and leaves so many areas of a clients’ finances at risk. Most people need advice, they just don’t know it. We must work on educating people on the importance of financial planning – and it needs to start in schools. I believe passionately that financial education should be part of the education curriculum. Financial wellbeing coaching in the workplace is the next step on the journey to help educate the working age on money matters.”

Aisa’s Pearcy-Caldwell added: “The advice gap could be tackled through a mixture of re-introducing commission products for lower requirement clients, and the regulator moving away from the principle that every client should be treated the same irrespective of requirements. The regulator has bought into the idea of full planning when people starting out simply need to start saving usually or providing protection for themselves or their loved ones.”