Vast swathes of consumers in the UK prefer an adviser to receive a commission payment over having to personally pay an adviser fee – this is where RDR will fall down.

There has been a great deal of holier than thou gesticulating among advisers in Britain over the past year or so, largely from those who espouse fee for service.

On the one side advisers who already charge, or are transitioning to, a fee for service model – so-called New Model Advisers – and on the other those who are largely remunerated by the products they sell.

In an ideal world, fee for service would be the way to go; removing the potential for advice to be swayed by the payments on offer from product providers, however in reality fee for service will close the door for thousands of British consumers who neither have the ability or inclination to pay a fee for financial advice.

New research from CoreData Research reveals that very few investors would be prepared to pay more than 1% of their level of assets to access an investment administration platform and receive advice therein.

Therefore how much would an adviser need to charge a client to economically justify having him or her as a client?

We predict around £2,500 – to cover the initial cost of setting up an account, conducting a thorough fact-find, building a financial plan, walking the client through the plan, undertaking the asset allocation and placement of investments, regular monitoring of performance, and an annual review with the client to assess their positioning and ongoing strategy.

However if few people are willing to pay more than 1%, and remembering that our research has revealed a large proportion would not be prepared any more than 0.5% of their asset level value, then advisers would only be attracted to clients with between £250,000 and £500,000+ of net disposable assets.

So $250,000 would be the cut-off for clients willing to pay 1% and £500,000 would be the limit for clients who are prepared to only pay 0.5%.

This is a scary prospect.

Two-thirds of British investors have net assets below £250,000 – and this is only of the people who are active investors, this doesn’t even include the many millions of people who are not actively investing.

Our research also reveals that 64.1% of these people are not inclined to invest through an adviser but are more inclined to do so directly – that’s quite a shrinking pool of prospective customers in a post RDR world.

Only 16.9% of active investors have a dedicated financial adviser, with 18.9% using them from time to time.

This is a major problem for the 25,000-30,000 advisers out there chasing business.

Advisers aside, though, the big question is what will happen to the few million people who were prepared to engage with an adviser pre-RDR but who are now shut out of the market because they can’t afford what it costs to receive advice post-RDR and are simply economically unattractive to advisers as prospective clients?

Will comparison sites or banks fill the void? Burningpants shudders to think.

RDR will have to be tweaked before it’s full roll-out in late 2012 otherwise, it could in theory damage the lives of the many consumers it was meant to protect in the first place.

Perhaps there is a supplementary legislative structure whereby complete transparency and disclosure with ‘opt-ins’ from clients allows advisers to still recoup some or all of the costs of the advice process from the product manufacturers themselves.

If not many, consumers could be left hanging in the breeze and a large proportion of advisers will be out of business.