UK's Lloyds Cuts Investment Advice As Regulatory Costs Loom

Tom Burroughes

27 September 2012

Lloyds Banking Group will no longer provide investment advice to clients holding less than £100,000 ($162,178) in savings and investments, highlighting how a new regulatory landscape is squeezing the mass affluent end of the landscape. The move has drawn criticism.

Clients with more than £100,000 of investable assets will be referred to the private banking arm of Lloyds Banking Group, it said in a statement today. The UK-listed bank said that its service to those under this financial sum will cease from November this year although it will continue to offer such clients protection advice. There will be no compulsory redundancies as a result of the shift, the bank said.

The announcement comes little more than two months before the UK’s Retail Distribution Review programme of reforms is due to take effect. The RDR ends the use of trail commissions by advisors and also raises the minimum qualifications on advisors. The RDR has been cited as a reason why some advisory businesses are closing or merging with others.

“An extensive review of how the market will evolve after the RDR has shown that for the majority of our customers demand for a fee based financial planning advice service decreases when they have lower amounts to invest,” the firm said.

“Existing retail investment customers with less than £100,000 of investable assets will be able to access a non-advised service through Halifax, Bank of Scotland and Lloyds TSB. We will give customers information and help with savings products on a non-advised basis and during 2013 we will increase the range of savings products available,” the statement said.

“Customers with over £100,000 of investible assets who would benefit from holistic financial planning will be referred to our private banking service, which will offer tailored fee paying investment advice,” it said.

“We will continue to grow our bancassurance business. It will be a simplified business with transparent products that add value and protect our customers. bancassurance remains part of our overall strategy to become the best bank for customers,” it continued.

Reaction

Lee Robertson, chief executive at the UK wealth management boutique, Investment Quorum, said he was concerned at the announcement.

“Evidently, only those consumers with £100,000 or more to invest will be offered face-to-face advice through the Group’s private banking services,” he said. “As an independent I don’t exactly champion the kind of advice offered by the high street banks, but I do believe in the provision of a national advice structure capable of delivering financial advice and assisting hard pressed families with their long-term planning and product purchases,” he said.

“We live in an era when it is easier to borrow at usurious interest rates, prompted by a minor celebrity in a television ad, than it is to start a simple programme. It should therefore come as little surprise that UK households are borrowing more,” he said.