Insurance companies and wealth management firms have always put their financial gains and interests before that of any client. Why wouldn’t they? They are in business to make a profit.
The reason they have long promoted product over service is that layers of costs could be built into them. Up until the RDR, these costs sometimes did not even need to be disclosed, or would at least be hidden deep in the small print.
Who pays for substantial offices in the finest locations, with board rooms decorated to the highest standard? Who pays for sponsorship of the world’s most prestigious sporting events, with luxury privileges for those who need to be entertained in order to keep their wealth in the hands of the corporate entity looking after it? Who pays for the mega salaries and obscene bonuses, and for the regulatory fines for misselling to their loyal client bank?
None of this would be possible if it was not for the investor and their money.
What the industry does is not wrong or illegal. These companies are quite within their rights to spend the income they generate from investors’ money how they wish.
But what if a client could keep more of the profits generated for themselves, rather than give them away to the big corporates?
What if you showed them they could still get the same return on their money, with the same consumer protection and backing of global finance companies, but paid less in investment and management charges?
Technology now gives investors 24/7 access to their money via platforms for 0.27 to 0.3 per cent. Global portfolios can be created for 0.16 to 0.34 per cent OCF with a mixture of tracker and active funds invested in global companies with up to $580bn assets under management. Advisers can take an ongoing advice fee and the total cost to the client should be no more than around 1.2 per cent.
Too many advisers layer costs into portfolios without any real consideration as to the impact they have on clients’ money. I call it soap-on-a-rope syndrome: the more people that touch the money, the smaller it gets.
I do not invest in any fund if I cannot see clearly what the cost of investing is and where the investor’s money is held. I do not like ETFs or structured products, and definitely not life assurance or investment house managed multi-asset funds. If an adviser can create a global portfolio for 1.2 per cent, why is the industry average still in the region of 2.3 per cent with advice?
The impact on a client’s money over their lifetime of paying that extra 1.1 per cent more than they need to is daylight robbery.
Perhaps the industry has its own interests to protect but without the client’s money, the industry would not exist.
Hannah Goldsmith is founder of Goldsmith Financial Solutions