Living up to the name of his business, Candid Financial Advice director Justin Modray thinks most advisers charge too much for what they provide.
It is a bugbear he speaks about regularly, provoking criticism from those who attribute rising advice costs to an increased workload post-RDR and pension freedoms. So what does he see as the problem?
He says: “Most clients do not have a clue either what they are paying, or should be paying, for advice. Many advisers avoid publicly disclosing what they charge, making it very difficult for clients to shop around and get a feel for what’s fair.”
Modray complains that some simply charge the standard industry rate rather than thinking about what consumers should really pay.
“Some think they can get away with charging a 3 per cent initial fee and 1 per cent annual fee. It’s high for larger portfolios and totally wrong. If they were to put it on their websites it would scare off a lot of clients.”
He has little sympathy for advisers struggling to disclose their costs clearly to consumers in a way that satisfies the regulator.
“It is as easy as displaying a rate card and a few scenarios with typical costs on a website. Almost every advice firm could do this, yet most don’t. I suspect it’s for fear of letting the cat out of the bag.”
Sorting the wheat from the chaff
Modray points out it would be easier for consumers to assess whether they would be getting a fair deal from advisers before meeting them if fees were published to a set formula. People would then be able to collect and compare the information they need and make a shortlist of advisers they want to contact.
While acknowledging the importance of the quality of advice, not just the cost, he believes price will be a big sway factor when comparing similar offerings.
“It feels like the quality of advice has generally improved, thanks to the commission ban and higher required qualifications clearing out the deadwood. But in terms of charges the advice market is largely taking a step back before it moves forward. Too many advisers have used RDR as an excuse to jack up their annual fees.
“Once they’re forced to publicly display their fees – which I’m convinced will happen within the next few years – we should start to see more competition as potential clients become more fee aware. That is a good thing.”
“Too many advisers have used RDR as an excuse to jack up their annual fees.”
Competition will cut through
That said, he expects some casualties as a result. “Legacy advisers probably can’t cull costs overnight to compete with more efficient, low cost competition, much like the airline industry has experienced.”
Modray came into financial services as a second-careerist in his mid-20s. He had started out in television commercial production but eventually decided his strengths lay in numbers and solving problems.
At 25 he moved into financial services with Bath-based advice firm Chase de Vere and was quoted on personal finance matters in the press. By the time he had joined Bestinvest in 2003, his media work had overtaken the advice side.
“While I enjoy talking with the press, as it is a great soap box to get messages across to consumers, I don’t particularly enjoy the limelight so running Candid Financial Advice is a great balance for me.”
Modray left Bestinvest in 2007 after it was bought by private equity firm 3ii. Having struggled to find another company he would want to work for, he decided he may as well start something himself.
“I wasn’t initially sure exactly what. To fill the time I taught myself web and database programming and ended up building Candid Money, a guidance website to help consumers avoid the many pitfalls financial services seems to throw at them.”
At Candid Money, Modray was constantly asked by consumers how to find a good adviser – a question he struggled to answer.
“Being unable to answer that question satisfactorily was a catalyst to thinking I should launch an advice firm I would be comfortable using myself.
“There were two key points. A good adviser will genuinely put the client’s interest first. It’s a cliché but a lot of people tend not to. The second point, which is closely linked, is making fees very competitive.”
Modray built the Compare Fund Platforms website to help people compare the cost of investing via fund platforms, stockbrokers and discount brokers. Candid Financial Advice was launched the same year with Ian Millward, Modray’s friend and former colleague at Chase de Vere.
“We worked out what we thought was a fair fee and how we could run a business charging that. While we are relatively low-cost we don’t compromise on the advice we give. It’s a key thing to build a business that’s whiter than white because the worst thing would be to build a business up and see it sink as a result of doing anything that’s deemed bad advice.”
Candid Financial Advice keeps a tight lid on costs, which allows it do the same for clients.
“We’re very efficient thanks to IT systems we’ve built ourselves and we prefer to train up bright people new to the industry than employ expensive old school advisers. But the fundamental reason we can offer our clients such a compelling deal is that we’re very patient and not greedy.
“We’ve been profitable from day one but are far more focused on building a valuable market leading business rather than trying to get rich quick. We feel there’s an almost limitless demand for what we’re offering and are very excited about the future.”
What’s the best bit of advice you’ve received in your career?
I’ve had very little advice but I did learn a lot from John Spiers at Bestinvest.
What keeps you awake at night?
Netflix. My wife and I are currently hooked on Breaking Bad.
What has had the most significant impact on financial advice in the last year?
The demand for final salary pension transfers, although I’m pretty certain it’s a mis-selling scandal in the making.
If I was in charge of the FCA for a day I would…?
Trim costs and focus on nipping problems in the bud rather than let them drift on to the FSCS with its ever-increasing levies.
Any advice for new advisers?
Play the long game. Focus on doing what’s right for your clients at a fair price and never compromise your ethics.
2013-present: Owner/director, Candid Financial Advice and the Compare Fund Platforms website.
2009-present: Owner, Candid Money website
2007-2008: Consultancy work
2003-2007: Head of communications, Bestinvest
2000-2003: Consultancy work
1995-2000: Financial adviser, Chase de Vere