A year on since Consumer Duty rules came in, new research from Octopus Money, the money advice brand for everyone, reveals that financial advisers are increasingly struggling to serve clients with lower investable assets. The research shows that on average, 54% of advisers’ clients books have under 100K of investible assets, but three-quarters of advisers (75%) say supporting these smaller portfolios is increasingly challenging.

Balancing quality service and financial health

In the 12 months since Consumer Duty, financial advisers are spending more time on paperwork, which is putting pressure on profit margins and the ability to serve low-asset clients. Over a third (35%) of advisers say the additional reporting requirements have increased the administrative time spent per client. As a result, advisers indicate that the time required to deliver a single advice case has more than doubled.

To manage these increased demands, many firms (36%) are recruiting additional staff. However, the cost of hiring and training new employees is putting pressure on profitability. Additionally, to align with Consumer Duty, and demonstrate a commitment to value, just over a third (34%) of advisers have been cutting fees, putting further strain on revenue.

Unintended barriers to accessing advice

Although Consumer Duty was designed to put customer needs first, the research suggests the increased regulatory demands have had unintentional consequences for clients with lower assets. Almost half (45%) of financial advisers have redirected their focus to onboarding clients with higher assets in the past 12 months, with another 45% planning to do so, potentially shrinking the access to advice.

These findings reflect a recent report by The Lang Cat, which highlighted that since the introduction of Consumer Duty rules, the number of individuals receiving professional financial advice has decreased from 11% in 2023 to 9% in 2024.

In a clear shift to serving higher-asset clients, the research finds that minimum asset thresholds have increased by 12% to £214k on average in the last year. Clients falling below this threshold face reduced support or being locked out of financial advice altogether. Currently, one in four (26%) onboard these clients with a minimum fee, 21% refer them to another service, 19% offer a scaled down version of their services, and 18% provide a one-off consultation. Worryingly, one in 10 (12%) decline to take them on entirely, underscoring the growing risk of a widening advice gap.

The impact of these changes extends to fee-structures, further creating challenges for low-asset clients. More than a third (38%) have increased fees for clients with small portfolios. Additionally, 42% have shifted to hourly billing, and 45% have introduced tiered charging, creating a more complex and often more expensive landscape for clients with lower investable assets.

Ruth Handcock, CEO of Octopus Money said: ““As we mark one year of Consumer Duty, it’s clear the regulation has had an impact on the industry as our research conveys. And yet, in the pursuit of improved client outcomes, we’re inevitably seeing a short-term tightening of advice availability rather than long-term innovations that will propel the industry forward. If workloads are doubling, and minimum fees are increasing, it feels inescapable that the advice gap will widen as more and more clients are unable to access good quality financial advice.

“Despite these initial, unintended consequences, I feel buoyed by the chance for a second wave of opportunity after this initial response. Innovation to serve clients and measure outcomes in new ways takes time, investment and collective action. As an industry, we have to foster an environment that enables everyone to adapt their service models to serve all clients effectively, regardless of their asset size.

“It will require creative thinking and implementation of new technology, alongside an openness to cultural transformation and partnership where firms aren’t solving the same problems in parallel. This open-source approach aligns with the spirit of Consumer Duty, but also ensures the long-term sustainability and growth of the sector for the good of every client.”

ENDS

About the research

The research was conducted by Censuswide, among a sample of 203 Financial Advisors (aged 18+). The data was collected between 04.07.2024 – 11.07.2024. Censuswide abides by and employs members of the Market Research Society and follows the MRS code of conduct and ESOMAR principles. Censuswide is also a member of the British Polling Council.

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* ‘Strongly agree’ and ‘Somewhat agree’ responses combined