According to Cook, this means IFAs that do use cheap as chips investment solutions "eventually undermine their flexibility and scope to sell their business and, potentially, ultimately the value of their business".
Jeffreys says some buyers may be able to maintain ultra low-cost solutions but typically not with the same service approach, which creates its own issues.
"Some buyers may have lighter touch or desk-based services, but there is a risk that this isn’t an approach the client wants or is familiar with," she says.
"The consumer duty further clarifies things, as businesses cannot have clients on disparate propositions, leading to clients being treated differently."
Different options
Advice companies that operate on a very low-cost basis, below 1.4 per cent, have a number of options when wishing to pass the business on, says Jeffreys.
Internal succession may be an option for some, albeit "having the right people in place to deliver that is fairly unusual", she says.
More likely, the seller will have to be open minded to their clients eventually paying higher fees and the principal needs to be part of that journey, she continues.
"The risk is clients choose to leave the service, but since they are unlikely to find another adviser at the lower price-point, that may not happen," says Jeffreys.
"The approach has to be well thought out and implemented sensitively, as the risk of losing clients sits both with the buyer and the seller."
Charging appropriately and fairly is essential, but running a profitable business that delivers value to clients should not be shied away from, adds Jeffreys.
"Financial planners shouldn’t undervalue their experience and expertise, both for commercial reasons and for the impact that can have on succession planning."
carmen.reichman@ft.com
