I am always saddened by the apparent wish to knock advice firms for trying to deliver profits as well as excellent standards. Most of us are just trying to make an honest buck.
The recent report from the Personal Finance Society highlights adviser firms are worried about the future because of the cost of running a business.
A staggering 75 per cent quoted the cost of regulation and compliance as the greatest threat.
We spend thousands on advice monitoring, back-office systems and staff to ensure every box is ticked and every client recommendation can be justified if challenged.
Do not misunderstand me; I firmly believe in raising standards and doing things right. I want my clients protected and my team to deliver excellence.
However, pushing my advisers to achieve individual chartered status is a cost to the business, so it is right for us to charge fees relative to the standard of service and advice clients receive.
Our back-office teams are highly qualified too. This represents a huge investment in our people. Our fees have to cover that investment or we will not prevail.
Reasoning with the regulator
My real worry is that the FCA just does not get it. It appears to want us to justify every penny we earn from a specific transaction or advice point, rather than looking at the wider cost of running a firm and providing a comprehensive advice service.
It is like basing the cost of a tin of beans on the cost of the can, the beans and the sauce, without considering the factory, the transport and the marketing – not to mention the product development, quality control and management of the business.
I sometimes wonder if those who criticise our charging levels really understand how the advice process works. Some have questioned why we charge a review fee when a discretionary fund manager is managing clients’ portfolios.
Is it not obvious? We review the client’s circumstances, risk profile and objectives to make sure the remit we have given the DFM is still suitable. We carry out the due diligence to make sure the DFM is still best of breed.
Importantly, we provide advice: we have a dialogue with the client that explores every aspect of their financial wellbeing and ensures their financial plan is on track. We look after the client; the DFM is simply there to look after the money.
There are those who advocate some kind of price comparison facility for advice. My feeling is this would be difficult to deliver. Firms are different, and advisers are different.
“I sometimes wonder if those who criticise our charging levels really understand how the advice process works.”
People buy people
Not unlike that tin of beans, you may well get a better product by paying more and it would be hard to pin down the quality issues to simple factors, such as how qualified the adviser is and how much time they will commit to the client meeting.
All the infrastructure and processes that underpin the firm need to be taken into account.
In the end, it is more about the client relationship than the elements that make up the advice package.
People buy people in our industry (thank goodness) and most clients are content to pay the fee we propose to them. It is about trust and continuity.
If we are to continue to provide high quality advice using empathetic, knowledgeable advisers and support staff, then we need to charge a fee that allows us to run a firm that maintains those standards and retains those people.
Carl Lamb is managing director of Almary Green