The number of orphaned clients is set to rise with nearly three quarters (72%) of advisers ending more relationships with clients than usual, findings from NextWealth have revealed.
According to the firm’s guide “Getting onboard with offboarding: A positive approach to client servicing and off boarding”, 66% of advisers have identified clients they plan to part ways with and well over half (58%) say their offboarding is set to increase over the next 12 months.
The guide, supported by HUB Financial Solutions and Vanguard, offers practical guidance for firms exploring how to get the best value from client relationships.
The findings showed a number of reasons behind the decision to offboard clients. These include a change in clients needs; clients no longer meeting the requirements for providing ongoing service; increased advice fees making advice unaffordable to some clients and clients not fitting in with the firm’s target demographic.
There was also mutual agreement amongst some firms between advisers and clients that the service provided does not represent good value for the client’s needs.
Heather Hopkins, managing director of NextWealth, said: “Advisers are grappling with the need to demonstrate fair value to clients who may have simple requirements, such as a small pension pot or ISA alongside their sense of obligation and loyalty.”
Hopkins said almost half of advisers (46%) felt a sense of obligation to clients, making the decision to offboard them harder.
NextWealth’s research showed that firms that have a defined target client profile, or who have segmented their client bank are more likely to have offboarded clients. Nearly three fifths (58%) of those that have segmented their client bank have offboarded clients, compared to 37% who have not segmented their client bank.
Uh Doug Abbott, head of UK client group at Vanguard, commented: “Growing regulatory pressure, including through the Consumer Duty, is making adviser firms examine in detail who their clients are, what they really need, and how that aligns with what they offer. This is leading both to firms adapting their business propositions, and to some firms shifting their focus to the client group they feel best able to serve.”
Hopkins added: “Now more than ever firms need to regularly gauge what help is available to them to understand which pathways for clients and their business can lead to the best, most valuable outcomes.”
