Could the most radical change in regulation for decades, brought in to improve the quality of advice, actually back fire and cause more headaches?
I started getting concerned about this when I was talking to a group of IFAs about delivering ongoing value in order to ensure that a regular income could be assumed. There were some first-class ideas with a strong focus on delivering exceptional value. But then there was another train of thought, that went in a very different direction indeed.
One IFA, who represented a large group, maintained that their view was to carry out regular quarterly fund switching as the golden ticket for ongoing fees. Now don’t think I mean rebalancing by this, I mean that they are fully intending to switch their clients’ entire investment sum out of funds which may be performing more than satisfactorily and then reinvest in alternative funds, just for the sake of it. This is not being planned with a defined investment process in mind, but instead the sole goal was to secure the ongoing fees and demonstrate “value”.
Now fund switches, if you strip out all the charges and done on the right basis, can help to ramp up performance. However, as we know, fund switches done too frequently and for no investment reason, can turn a sound approach into a much reduced asset value and an unhappy client.
What a shame it would be if this happened, but unless clients don’t just focus on what they will get for added value but what impact that would have on their finances, then it could be a disaster waiting to happen.
Philippa Gee is managing director of Philippa Gee Wealth Management.