Dumping C&D clients 'a bad look for an industry trying to regain consumer trust'

In a new opinion piece published on ifa this month, financial adviser and founder of digital solution Scientiam, Nigel Baker, argued that there could be long-term consequences to the "record rate" of termination letters being issued.

Mr Baker wrote that while client numbers have dipped since the Future of Financial Advice reforms, activity has continued to ramp up resulting in long-term clients being dumped because they can't be looked after "cost-effectively".

"The institutions are leading the charge. They bore the brunt of ASIC’s ire, paying out over $3.15 billion in compensation for misconduct and fees-for-no-service, so there’s little-to-no appetite for flexibility," Mr Baker wrote.

"Yet, many abandoned clients remain in life insurance, superannuation and investment products originally recommended by their former adviser.

"The uncomfortable truth is that C&D clients have collectively contributed to the success of many advice businesses.

"Dumping them en masse is a bad look for an industry trying to regain consumer trust."

The Arch Capital adviser suggested that firms should find creative ways to meet obligations and manage risks, including taking the focus off high-net-wealth clients.

He wrote that a broader value proposition would assist advisers in being able to help more clients and build confidence in the sector.

"Part of the solution must lie in being able to legally and seamlessly transition clients from the realm of personal advice to the realm of general information," he wrote.

"Over time, as a client’s circumstances and needs change, they should be able to flick back and forth between both worlds, guided by their adviser."

Read the full opinion piece here.

Mr Baker's comments come only weeks after he appeared on the ifa Show podcast, where he called on the industry to directly address the issue of attracting new talent.

Mr Baker said the businesses he speaks with are "flat out" but that the real challenge is attracting new talent and advisers into the sector.

"We've got this real gap of people who just haven't been in the industry and fair enough. For the last 10 years, why would you join an industry that's been bashed around?" Mr Baker said.

Listen to the full episode with Mr Baker here.

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.