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Cut Costs by Half or Charge Big Clients More

July 16, 2013

Consulting firm Deloitte is telling U.K. financial advisors to trim expenditures and reach downmarket to offset the rising costs of serving wealthy clients, according to an article in the Financial Times’s FTAdviser section.

Deloitte figures it costs a U.K.-based advisor about £1,000 ($1,510) a year to serve a client. To keep margins healthy on an assets-under-management basis, the consultancy says advisors should stick to customers with at least £200,000 (a bit over $302,000) in investable money.

Trouble is, there aren’t enough U.K. clients of that description, actual or potential, to go around. So British advisors — like their counterparts here, though Stateside advisors might be goaded more by opportunities in the retirement-planning market than by a shortage of customers — may have to cut costs in half to compete for clients with less than $150,000 to invest.

If paring back on costs seems a tall order, Deloitte has a radical suggestion. On the ground that the traditional approach “may not actually match the rather extraordinary savings you can bring for those higher net worths in terms of tax and financial planning,” wealth managers might start hitting richer clients up for a proportionally larger chunk than they charge smaller customers.

By Thomas Coyle
  • To read the Financial Times article cited in this story, click here.