Full-service models

Tim May, chief executive officer at the recently-renamed Association of Private Client Investment Managers and Stockbrokers, considered the benefits of full-service business models, versus simpler service models, such as boutique firms.

“There is no direct regulatory barrier to prevent a firm from offering all services, if they choose to do that and if it suits their client base,” said May.

“I think the biggest challenge to all our firms is the whole advice area, for a number of reasons. The RDR has prompted it in this country and the cost of providing advice done explicitly in accordance with EU and UK rules is not cheap. Some are struggling to find that sweet spot for providing advice, because it has to be highly automated if you go down to that lower end of size of client,” he said.

The head of Credit Suisse’s private bank in the UK, Phil Cutts, said the key issue that the industry is facing is that “no two clients are the same”.

“Some ultra high net worth clients are semi-institutional and often have their own family office or have a full institutional service, but unlike traditional firms, they want a more holistic wealth management experience. A full service firm can do that,” he said.

To this end, global consultancy firm EY has seen increasing feedback that wealth management clients are looking for a single advisor, yet they tend to use a number of organisations, when research is done on how the clients actually manage themselves, said director Simon New.

“I think that you can offer full service, provided that you offer a standardised proposition. That standard is not going to appeal to everybody, however, where we see firm’s break themselves financially is when they deviate into bespoke, custom-made products; services which financially just aren’t viable. If you can get people to stick with a standard, you can get a value proposition down into the low hundreds, but we see organisations trying to provide non-standard products at the low-hundreds, and I just don’t see the economics working,” New said.

Agreeing with New, co-founder of Lord North Street Private Investment Office, William Drake, said it was mysterious how firms can deliver advisory services to smaller clients.

“The clients we have are very rich, but they are no more populous than others, and the time it takes for us to figure out what they want, is a while. We have a fairly strict minimum of £25 million because we simply can not give that service and make any money on smaller clients,” he explained.

And there does seem to be widespread concern for the one-stop shop, as Andrew Fisher, chief executive of Towry, put it.

“There is a big danger in the one-stop shop, that a client won’t get value for money, or worse, from the institutional view, where the client arbitrages the firm,” he said, agreeing with the Wealth Management Association’s Tim May. 

“My issue is, that if you have a person who is purporting to understand all asset classes at all times and at the same time also is managing a relationship, then that person is either a genius or a charlatan, and I fear that there are not that many geniuses in our industry,” argued May when considering the possibility of one single advisor providing full service to as many as 250 clients.