IFAs are offering advice on small retirement and investment pots despite widespread talk of minimum investments

28th April 2016


It may be easier for investors with small pots of money to obtain independent financial advice than may have been previously thought.

While there has been much discussion of minimum amounts that investors must have before an adviser will take them on as a client, research of 233 advice firms by watchdog the Financial Conduct Authority suggests that very many firms are prepared to advise clients with small pots.

The research suggests that those seeking to manage their retirement income under the pension freedoms should also be able to find an adviser should they choose to do so.

The regulator asked firms to provide data on the number of customers (both new and existing) they had advised on retirement income and found that post-pension freedoms, 8% of customers advised had pension pots smaller than £10,000, and 18% had pension pots in the £10,000–£29,999 band. Overall, 46% of customers had pension pot sizes of less than £50,000.

The regulator looked at the proportion of firms providing advice to customers with different pension pot sizes. Post-pension freedoms, in 18% of firms, customers with pots of less than £10,000 accounted for at least 5% of retirement income customers, firms had given advice to. This figure increased to 55% for those with pots of less than £30,000, and to 74% for those with pots of less than £50,000.

Of the 38 firms that reported the minimum pot size thresholds for retirement income advice 21 had thresholds of £50,000 or less, and 15 of £30,000 or less. The median threshold (minimum pot size advised) across these firms was £50,000.

The survey also asked firms to rate the importance of various factors when deciding whether to accept customers for retirement income advice, including factors such as pot size, future relationship potential, and referrals.

A customer’s personal circumstances and future relationship potential were rated as the two most important reasons for accepting retirement income advice customers, with 73% and 76% of firms, respectively, saying it was a ‘very important’ or ‘important’ consideration.

A customer’s other assets and liabilities was another important consideration, with 68% of firms saying it was ‘very important’ or ‘important’.

Pot size in isolation was deemed relatively less important, with 13% of firms rating it as a ‘very important’ consideration and a further 28% rating it as ‘important’.

When the regulator looked at advice on ‘pension accumulation’ i.e. when investors are at the stage of building a portfolio, it found that 62% of customers had investable assets of less than £50,000; 48% had less than £30,000; and 30% had less than £10,000. Firms were asked to report the pension accumulation assets advised on in the most recent 12 months for which they had data, which may only account for the contributions to the pension in that year.

The regulator found that in 52% of firms, customers with investable pension accumulation assets below £10,000 accounted for at least 5% of the customers to whom they had given pensions advice. This figure rose to 81% for customers with investable pension accumulation assets below £30,000, and 92% for those customers with investable pension accumulation assets below £50,000.

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