Human beings measure whatever can be measured. Then they turn the numbers into a battleground of different views. Arguments about costs of financial products and levels of adviser fees follow this pattern.
Like many advisers, I am confident that most of our clients gain benefits, in the form of tax relief gained and tax not paid, that are greater than the fees they pay us. But as far as I know, no one has ever tried to run a study along these lines, probably because it would be too difficult. Journalists find it much easier to report shouty, self-interested claims of how much investors lose from paying fees than they do to engage with why clients sign up for ongoing advice and what benefits they get from it.
Anyway, unlike promoters of low-cost financial products, advisers have no interest in selling products. Our interest is in having clients who pay us fees for life. To achieve that, we have to keep them happy. One quantifiable aspect of that is the tax savings already mentioned; another is investment returns. Others are communications, personal relationships, trust and efficiency. These are, of course, intangibles, which means they are very hard to measure, and since there are no numbers to argue about, their importance is easily overlooked by hasty journalists and pedantic regulators.
Still, I am sure for most advisers a common response to communications we send out to clients explaining things is: “I don’t bother to read that. Why hire a dog and bark yourself?” And if you think about the hundreds of hours it took the average adviser to master the intricacies of the UK pension rules and their application to people in different circumstances, why on earth would you expect a client to want to know about all that? As a client, you engage an adviser to suffer that pain on your behalf.
“Unlike promoters of low-cost financial products, advisers have no interest in selling products. Our interest is in having clients who pay us fees for life.”
A professional ethos where the client’s interest always come first, and robust processes that apply to every adviser and every client, are necessary protections of that kind of trust. While anyone can design a process on paper, to actually implement advice processes and be able to demonstrate that you have followed those processes is what sets a professional firm apart. Any adviser that has done this knows it is not easy.
I sometimes wonder what a personal law firm would charge clients for an ongoing service that undertook to contact and advise them in response to any law changes taking into account all their circumstances. Most law firms would probably conclude that the risks of doing this would far outweigh the potential fees. It is remarkable that financial planners offer such services and that on the whole they do deliver them.
Unlike planning evangelists, I do not believe everyone needs financial planning: only those with relatively complicated affairs and sizeable assets really need a service where you burn through hours costing £150 each. For those that do need a planner, though, the service is both hugely valuable and hugely valued by most clients. There is a growing contingent of professional financial planning firms that probably do a better job for their clients than many grand-officed, fancily-titled traditional wealth managers, whose model is condescension to those of moderate wealth and servility to the stinking rich.
Chris Gilchrist is director of Fiveways Financial Planning