Whenever I hear another highly paid regulator going on about the need to reduce advice costs (translate that to “cut advisers’ earnings”) I get the same kind of feeling as Prince Charles inspires in me when he tells us we should all travel less to reduce global warming.
I will consider giving up my annual holiday when His Royal Highness gives up his first-class flights to the breaks in exotic locations for which we pay.
It is not only the regulator, of course. Pundits regularly pontificate advisers should be picking up at least part of the charges platforms make for their services. Platforms, the argument usually runs, are used by advisers for their convenience and to cut their own administration costs at the client’s expense.
Whenever I read such tripe I wonder at the writer’s paucity of perspective. All the adviser firms I ever worked at before setting up West Riding in 2004 charged way more than we charge today. To be fair that was hardly surprising. Pre-platforms, a large portfolio valuation could take half a day to compile. Vast amounts of time were spent filling out applications to different investment groups.
Now, prices can be found online rather than needing to phone around umpteen companies. Even so, without platforms, the time taken for such routine tasks would multiply enormously. Clients are already reaping the benefit of those efficiencies through our lower charges, so why should we bear another expense?
Advisers have picked up more than enough extra costs in recent years. Time was when all product literature was provider supplied. Now it is online and we bear the print costs. Proposal forms used to be sent on paper and providers processed them.
Now we input online proposals and sundry other transactions. Who do they think pays for the time involved? And that is before we even start on regulatory costs, which can only escalate as the FCA, the Financial Services Compensation Scheme and the Financial Ombudsman Service spend ever more of our money.
Those who argue for advisers paying platform fees are forgetting – or conveniently ignoring – the fact the customer ultimately pays for everything in every business. The same goes for those who similarly argue against the facilitation of ongoing fees by providers.
Force the extra costs of credit control and/or platform fees onto advisers and they will either have to take a pay cut or increase their other charges. Have these people ever heard of the law of unintended consequences? Regulator-mandated inefficiencies inspired by dogma can only move costs around while increasing the total. Overall, customers will pay more, not less.
Like the “menu” and numerous other “initiatives” by our regulator, contending advisers should pick up platform costs is an argument for a pay cut, pure and simple. The idea will appeal to some but the reality is, in a free and competitive market, anyone who wants to absorb such costs and work for less money is free to try.
I look forward to seeing the regulators and their political masters leading by example. Swapping their platinum-plated pension scheme for a money purchase model would be a good start.
Neil Liversidge is managing director of West Riding Personal Financial Solutions