The expression involving the cost of everything and the value of nothing comes to mind. One of the immeasurable detriments to consumers of the RDR is that many customers will be driven to those that offer the cheapest price and not necessarily the best advice.
We have often found that prospective clients have baulked at the estimates we have given, unable to understand the cost to us of delivery and the value of what they are getting. Although what we quote (and charge) is much less than the traditional 3 per cent plus trail that many consumers would have been paying in the past, it is still difficult to convince new clients.
We know of several instances where clients have gone elsewhere believing either their new advice was free or better value and they were frankly “conned”.
While we make provision in the cost for our advice for any possible comeback on the advice we give, capital adequacy and reserves, for example, how many of those IFAs that undercut us are making adequate provision for their advice?
The cheaper quotes are often those from advisers that disappear and then dump their liabilities on the more responsible and prudent IFAs remaining. In my opinion, undercharging is as bad as taking 7 per cent full commission up front and walking away from the client and in that sense the RDR achieves very little.