Scott Gallacher: Time to take the adviser charging debate offline

Scott Gallacher

Advisers are rarely in competition with each other for clients. Generally it is client apathy – or the banks – we battle against, not each other.

With this in mind, we are normally more than happy to share ideas and debate issues with each other, as there is little to be lost by helping our peers. In fact, given we effectively share the costs of failure via the Financial Services Compensation Scheme, there is a lot to be gained from helping other advisers. I have benefited a lot from this and try to make my own contribution by sharing ideas and experience too.

Historically, this sharing of knowledge took place in the coffee breaks at seminars or over a beer. Naturally, this has now moved online with the use of Twitter, LinkedIn and Facebook. I am a big fan of Twitter and wholeheartedly support this trend. However, there is a drawback to this move online: everyone, including potential clients, can now see these debates.

On one hand, this could be invaluable in helping the public see the issues around financial planning and tax saving, as well as providing early warnings about potential scams. On the other, however, advisers really do spend a lot of time criticising each other’s practices.

The biggest negative online conversations at the moment seem to be around fees and adviser charging. Much of the debate has been around some advisers’ objections to ad valorem fees in particular, as they feel they cannot be justified under any circumstances or at any level.

I am generally agnostic about fees. Provided advisers are being paid for their expertise and the value they add for clients, and that those fees are fully agreed by their clients, I struggle to see an issue.

However, I do feel the debate on this subject would be best held offline. Indeed, I fear the main result of such activity will be one of sending out the wrong message: that advice is expensive or we are ripping off clients.

I follow a number of solicitors and accountants online, and I do not recall ever seeing them have such a debate on their own fees. Perhaps it is a maturity thing, as we are still a relatively young profession, but we need to realise the value of our advice and we should be paid for that value, rather than highlighting the cost of it.

In one recent online conversation, for example, I pointed out I had saved a client’s family an effective 52 per cent tax rate by taking their “income” from one investment pot rather than the client’s original intended source. Unfortunately, rather than perhaps retweeting and sharing this “success” with the general public, another industry expert commented it was merely standard advice for which I no doubt charged a fee.

As I countered at the time, with there being an estimated £4.6bn annual tax waste, there is arguably no such thing as “standard advice”.

When faced with a continued savings, pension and protection crisis, surely it would be best to stop sending out the wrong message and instead focus our efforts on talking up the value of advice.

Scott Gallacher is director of Rowley Turton