One firm looking to exploit next year's start of the UK Retail Distribution Review in a specific way is Bestinvest, a firm serving HNW and affluent individuals that is also eyeing those "orphaned" by regulatory cost burdens.

As the UK’s Retail Distribution Review reforms are about to kick in for the advisory industry, one wealth management house that looks to take advantage of the changed landscape is Bestinvest, a firm that has been through major changes over the past 12 months.

The company, founded back in the mid-1980s, now has over £4 billion ($5.4 billion) of assets and serves more than 50,000 clients. In 2007 it was bought by management and 3i, the investment firm. Bestinvest later acquired HW Financial Services, part of Haines Watts, the accountancy group, in 2010.

The firm is looking, among other objectives, to tap the market for what it calls “orphan” customers left potentially in the cold by the rising regulatory costs imposed by the RDR.

In late November, the firm rolled out an investment “guidance” service, or “FIRST” – Free Investment Report Service And Tool. The service is designed to help any UK private investor to analyse their portfolio free of charge and without having to get Bestinvest to be appointed as an agent. (The hope, of course, is that such clients eventually sign up for other Bestinvest services.)

In recent research by Deloitte, it was estimated that up to 5.5 million people could find themselves “orphaned” in 2013 as advisors raise minimum investment thresholds to stay profitable as RDR-related costs bite.

But that is only a part of what this business is doing. Contemplating an environment of higher regulatory costs, greater demands for professionalism and expertise, Bestinvest has revamped its management team. Peter Hall, chief executive, recently spoke to WealthBriefing about how the business is doing.  This publication also spoke to Jason Hollands, managing director, business development and communications. Hollands has recently rejoined the firm he left around a decade ago.

“One of the key objectives was to come up with a really top team. There will come a point where will be in acquisition mode and we need the ability to run a much bigger business,” Hall said, speaking at his offices off Curzon Street in London’s Mayfair district.

For example, Bestinvest has brought in Donald Reid as chief operating officer (formerly COO at UBS Wealth Management), Gareth Lewis as chief investment officer (having held a similar role, also at UBS Wealth Management), and Lee Dooley as head of direct and advisory (ex-St James’s Place and Barclays Stockbrokers). And in the case of Hall, he came across about two years ago from UBS also, having held the post of managing director, UK regions and investment management at UBS Wealth Management. There is, in other words, a strong “UBS flavour” to the top team.

Besides FIRST, the firm is working on its SELECT execution-only service (which includes a SIPP, ISA, Junior ISA and Investment Account). It has launched a fully bespoke discretionary service, a managed portfolio service (centralised portfolios) and is working on improving client reporting, Hall said.

Describing the FIRST service, Hall said: “What it does is that you enter details of existing investments and we see how much risk you are taking, whether you have a well-balanced asset allocation, our view on the quality if each holding, and whether the costs are above or below average.”

Hollands added: “Execution-only investors in the past tended to be enthusiasts about researching investments and more transactional; these potentially new users of execution-only services [orphans] will be very different. They have relied on advice in the past but are either not willing to pay fees next year or will be too small for the new type of advisor coming in [after RDR].”

So far, take-up for this “orphans” business has been encouraging, said Hall. “We have had over 6,000 people who have come onto the site in the first three weeks. It has been a fantastic reaction.” “We haven’t done any marketing apart from some coverage in the press,” he said.

Time means money 

“Half of the business is self-directed users and half is in wealth management. Many clients don’t fit neatly on one side or the other,” he continued. “A lot of people have reached the point in their lives when they don’t have time to manage investments,” he said.

Bestinvest, according to a statement it issued in late November, argues that many firms see “execution-only” services as a panacea for serving those clients left abandoned or disillusioned with financial advice. Solely online services have limited appeal, the firm said.

As the RDR works its effects during 2013, time will tell how severe the “orphan” client issue proves to be. But it is encouraging that at least some firms are thinking about such clients not as a group to be ignored or shrugged off, but as an important opportunity.