With many fintech start-ups and more established institutions hoping to take a greater share of the financial advice market, some industry experts have raised concerns over what might happen to the clients of IFAs who are leaving the market.

Jason Whyte, director of insurance at EY, told Bridging & Commercial that the strategy of obtaining client books was potentially dicey.

“Acquiring books from retiring advisers might look attractive as a way to get a quick boost, but it’s not without risks.

“By buying an existing book, robo-advisers might also be buying latent legacy mis-selling risk, and there is also a risk of defection: will clients who signed up for personal service really accept an automated system in its place?

“Private equity-funded advice consolidators have been cautious about buying out smaller IFAs, so robo-advisers would do well to tread carefully.”

In December, research conducted for the Financial Services Consumer Panel slammed robo-advisers over the alleged lack of transparency of their costs and inability to communicate clearly.

Daniel Broby, director of the Centre for Financial Regulation and Innovation at the University of Strathclyde, suggested that such complexities could alienate an older generation of clients.

“Retiring financial advisers are mostly old school, having built their client base up through personal connection.

"The clients – being unfamiliar with the technology or what it is trying to achieve – may well not prove as sticky as the millennials.

“The robo-advisers would have to overpay for a non-captive client base that would not generate sufficient fees to cover that cost of acquisition.”

Some experts have voiced concerns over the older generation’s ability to understand robo-advice

‘All the disadvantages remain with the selling firm’

Unlike Daniel, Martin Stewart, director of advisory firm London Money, argued that retiring IFAs had more to lose in selling their client books than the buyers.

•   New consumer report slams robo-advice
•   Could fintech predict when a client needs a mortgage?
•   Robo-advisers using personal data could be the 'thin end of the wedge'

“If you start a business, then from day one that business has the owner’s DNA firmly entwined within it [and] that is something that cannot easily be undone.”

Martin cited an example of how accepting a “golden handshake” when selling a business could return to haunt the original owner.

“The owner regretted it, advisers left the firm and another was off work with stress at the thought of having to revisit their longstanding clients to explain why their fees were going up 200%.

“So, while there may be disadvantages for the buyer in terms of integration and client retention, I firmly believe all the disadvantages remain with the selling firm.”

Regardless of the financial repercussions, Martin also highlighted the potential human impact of such a move.

“Let’s not lose sight of the fact [that] these are real people with financial needs [who] were promised a service,” Martin added.

“…The FCA themselves have questioned some client bank sales not being as client-centric as they should – I’d like to see what they say when it’s Metal Mickey that is doing the buying.”

Clients are likely to expect a certain level of service from their adviser

‘Being passed to someone else is meaningless’

Sebastian Riemann of Libra Financial Planning believed that retaining a human element could help smooth the transition from IFA to robo-adviser.

“Clients generally buy into the adviser, so being passed to someone else is meaningless unless done on a personal level with slow transition and a detailed introduction and endorsement.

“The likely end result is a hybrid proposition, just like we are seeing with online estate agents.

“The successful ones still have managers and sales negotiations, although clients can choose the level of interaction and the need for an expensive office on the high street has deteriorated.”

This view was shared by Jason, who stated that a number of larger players – particularly asset managers – had already bought into the market by acquiring promising robo-advisers.

“…This will drive the rise of hybrid models combining robo and human advice – for whom buying books might be a viable way to scale.

“The complexities of the decision-making process and regulatory compliance, however, is likely to mean that a full robo-advice offering is some way off.”