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The cost of advice debate lacks transparency

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

Journalists are in the business of asking difficult questions. When we are rebuffed, or where firms hide behind bland and/or blanket statements, it is somewhat to be expected.

But when we are trying to get hold of information that should be readily available and we are met with the same response, it is clearly both frustrating and exasperating. It is also potentially concerning.

Yet this is the situation we find ourselves in on the subject of advice charges.

We asked the biggest advice firms based on the number of advisers for basic information on initial and ongoing advice costs, services provided and any additional fees. There is nothing in there that would not be disclosed to clients, and nor were we asking for chapter and verse on the profitability of a firm’s advice business.

The reluctance with which many of these larger firms dealt with us, and the paltry responses we received, do not adequately reflect the levels of which transparency at which I know other firms operate.

Either the information is not available because it is not being given to clients, or there is an entrenched inflexibility in having an open discussion about what is being charged for advice.

For all the labouring that has been done over recent years to champion advice as a profession, this kind of experience does nothing to reinforce that idea. If anything, an outsider looking in would think these firms have something to hide.

I understand firms are wary about how their charges will be perceived when set against others. But in a functioning market, this would happen anyway – clients would and should be able to compare costs and services offered, and make a judgement call on that basis. I doubt advice firms are refusing to set out their charges to prospective clients on the grounds of “commercial sensitivity”.

We asked narrowly focused questions about the cost of advice and were largely met with a wall of silence. I dread to think what the client experience is like.

There are many firms that understand all this already. They know the value of the service they deliver, and are confident to talk about it openly.

But it is a shame that among the largest firms, this is not the view held by the majority. On this measure alone, the RDR’s drive for transparency has well and truly failed.

Natalie Holt is editor of Money Marketing

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Hi Natalie

    Did you ask them to detail the services they provided in return for the cost or did you just ask them to tell you the price?

    It seems to me that one without the other isn’t really worth knowing

    • Hi Nick,

      I asked for the services offered on both max/min packages for that very reason. See main feature for some disclosing regularity of reviews/investment committee meetings etc.

      Thanks,

      Justin

  2. Hi Justin

    Here is an idea!

    Create a short client case study. Ask advisers to produce an engagement letter setting out precise details of what services they will provide and at what price.

    Publish results

    I will be happy to participate

  3. Once again though, this comes back to journalists like to stir things up and often miss the point.
    “Price is what you pay, value is what you get” (W Buffett)
    Financial advice is a highly specialised and bespoke service provided to individuals or business clients. We are not selling fruit down the market or biscuits in the supermarket.
    The figures you did obtain often contained a range of %’s which are difficult to compare or a range of fees for a financial report etc.. That is what I would expect.
    Clients are free to have an initial chat/meeting with as many advisers and then make there own mind up on who they proceed with, taking into account many factors, including the proposed charges.
    Also you presumably asked firms for their charges as a journalist, not as a potential client, so firms are not obliged by RDR to provide you with their charges, frustrating though that may be to you!

  4. Hi Natalie, most probable is that the firm’s asked did not trust you to reflect the information fairly or reasonably. Having read your article it’s fair to say they were right as you have chosen to join most journalists by making a huge number of sweeping statements using evocative language.

  5. As a business we find it hard to put a price on a piece of work just like that, the reason why most advisers dont show their fees is purely down to us not being in full understanding of work is required to give the client good advice, this is the reason we offer a free consultation.

    Have you tried to ask a builder for a quote for a two story extension ? the builders reply will be , how big do you want it, what fixtures do you want in it , what do you want it made of ? etc …

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