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Nic Cicutti: Hannant’s knee-jerk response to Which? report does advisers no favours

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OK, here’s a small trade secret for any budding scribes out there. If you want to write a column for Money Marketing, there are several distinct phases that help determine what finally appears on the printed page, or on the MM website.

The first is finding a subject with enough meat on it for a decent discussion. The second is coming up with a line of argument, marshalling any available facts and figures that may help the discussion flow. Third is finding the words to write the piece.

To be honest, it is the first part that is by far the hardest. Quite often, you will wonder whether a subject is even worth bothering with.

Which is how I felt last week when reading Money Marketing’s story on research by the consumer group Which? to the effect that “of 500 advice firms’ websites, 70 per cent do not publish their charges online”.

Apparently, of 206 firms contacted by phone, 31 per cent provided a rough idea of fees, but 12 per cent refused to divulge costs.

Now, of course, we do not know precisely who the Which? researchers spoke to at each firm, what they asked and exactly what the firm’s response was. We are being asked to take the consumer group’s evidence at face value.

But on the whole, that sounded to me like a wholly unexceptionable report, more of a statement of the bleeding obvious than anything staggeringly new.

And while I expected a mildly unenthusiastic response from advisers, my initial take was that the omission of charges on a firm’s website was more to do with that old-fashioned feeling about discussing financial matters in a public arena than any deliberate decision to conceal information.

And then I read Apfa director general Chris Hannant’s response, in which he accused Which? of creating a climate of fear and “damaging consumers’ interests just for the sake of the headline”. He added: “The message you take away from the press release is you shouldn’t go to an adviser because it’s all a bit murky.”

There I was thinking that Which?, a body that has always supported the concept of independent financial advice, was trying to make a fairly obvious point about opacity and disclosure. Not as far as Hannant is concerned.

In his world, if consumers really want to know how much a specific piece of work might cost them they can make an appointment with a firm and find out at a face-to-face meeting.

This sounds fine, until you apply the same principle to buying a bedroom suite. So, you go on a website, look up beds and mattresses, bedside tables, wardrobes and chests of drawers, make a list of what you want and then take it to the store to be priced up. And even then, only by appointment.

Or you go down a supermarket aisle and fill your trolley, with the prices only being made known to you after everything has been scanned through the till.

In fairness to Hannant, he knows this. At the end of his diatribe against Which? he makes the same analogy about “walking into a shop without prices” and concedes that approaching an adviser “without any idea of what it will cost can be intimidating”.

But there is no sense of a real meeting of minds there, only a hostile knee-jerk reaction to a nondescript report by Which? that merely calls for a very basic level of charges disclosure be supplied by advisers on their websites.

Which brings me to a final point. Over the past few weeks, Money Marketing has rightly focused on the issue of where trade bodies are heading, specially in the wake of events at the Investment Association, but also elsewhere.

Unlike a trade union, the ultimate sanction of a withdrawal of labour is rarely if ever available to a trade body member. For the most part, the way to achieve an objective is a combination of lobbying and the use of alliances with others to help shape a commonly agreed outcome.

In this instance, for example, another hypothetical option for Hannant might have been to acknowledge there are indeed issues with charges information on some advisers’ websites.

He could then have advanced some perfectly valid reasons why this might be the case – for example, the difficulty of estimating a precise charge for work that is largely unknown until it is fully assessed and discussed.

Hannant could then have committed Apfa to working with Which? to create a voluntary model whereby such disclosure might best be achieved.

Instead, we got an entirely predictable negative response from Apfa. While it probably made the more Neanderthal sections of its membership happy, it did little or nothing to support the growing number of advisers – some of whom are also Apfa members – who believe being transparent with potential customers is the way forward for any business.

Especially a business that, after all, is itself supposed to be looking after a client’s money – while promoting itself on the internet, the most global of all shop windows.

Ironically, what Hannant also forgets is his reaction to a very basic issue will stay on the internet for ever, viewable by any consumer who wants to find out about charges disclosure. Another fantastic advert for his members.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk. Follow him on twitter @NicCicutti

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Comments

There are 17 comments at the moment, we would love to hear your opinion too.

  1. Christopher Pitt 29th October 2015 at 2:19 pm

    Great article with points very well made.

  2. Presumably Nic would also ring an architect and ask “how much do you charge to design a house” and expect an answer?

    • Actually, I would expect an architect, like any professional, to display typical charges on his or her website. Or an hourly rate, or whatever best allows a person to estimate the potential cost of s piece of work s/he is expecting that professional to provide.

      • Hi Nic,
        Just looked around internet about you …linked in, twitter etc, .. as I am looking at employing a financial journalist, whats your hourly rate? or how much would you charge to write a 1000 word report…cant seem to find your prices

        • Hi MIke.

          My charges depend on the audience, the person doing the commissioning and the social purpose of the article itself. I have been known to write for nothing. In your case I would charge £1 per word.

          • Cheers Nic, so your charges depend on the audience ( ie..type of business, how complicated it is to do etc etc ) and thats why you need to find our exactly what your client needs you to write about before quoting them …just like us advisers

            Thanks for quoting me, £1 per word seems expensive, especially when you write for free , cant you reduce it

  3. Spot on Nic, if potential advice Clients fall at the first hurdle because they think that the general non-disclosure of advice fees is due to their prohibitive nature, then whatever the % is it will be a % of zero. Disclose and explain is the way it should be. Invite discussion and explain the rationale. If the Client still does not want to pay for advice, then so be it. It will be their loss in the end.

  4. I don’t understand any of this nonsense.

    Of course potential clients want an idea of how much the exercise is going to cost. We tell them the first meeting will cost nothing and we will ascertain as far as we can exactly what is required; we will subsequently issue an estimate in duplicate setting out what we feel is required, action by action, and quoting a price. We point out that no cost has been incurred until such time as they accept the estimate by signing one copy and returning it to us. Otherwise they are free to walk away owing us nothing, to take our estimate elsewhere to see if they can get it cheaper, or to take their time and think about it for as long as they like.

    As far as I am aware the overwhelming majority of my peers operate a comparable system. In addition our IDD quotes the parameters of our potential hourly rates if we decide to charge on this basis. Where is the problem?

  5. Nic
    I think you are being a little unfair to Chris. I think you should bear in mind that he has to reflect the views of his members, the bulk of whom are the Networks (those wonderful depositories of integrity).

    Many advisers regard Which? as the devil incarnate (going back as far as Angela Eagle). I do agree that latterly they actually have been in the side of the true IFA. But I have never been a great fan I don’t speak of financial services in particular, but I have seen the motor reviews and some of the other reviews for time to time and have to say that I have often found them to be an inaccurate load of tosh. As far as cars are concerned, they are in the Daewoo bracket. Their views on BMWs, Audi’s and Mercedes are not exactly enthusiastic and I have never seen a review of a Maserati!

    However, this issue of stating fees on the website is again a topic where I think both you and they are wrong. My own site used to say that I charged for the job. But seeing as I never knew precisely what the job entailed I also stated that once the initial meeting had taken place (at no charge) I would then me pleased to quote the fee before any work commences and at no obligation. If they wished to proceed they had to sign and return a fee agreement which spelt out the work to be undertaken, the terms and the duration. The price was always adhered to – no matter if difficulties emerging later made it less profitable than expected. I know this is by no means a unique approach.

    Therefore, your examples are a bit disingenuous. If I run a furniture warehouse I can put a price on settee as I know at outset what it cost me and what my margin is. I may charge delivery in addition and if I’m sneaky I’ll quote ex-VAT and put the total in small print on the bottom. However, the customer won’t exactly know the quality – unless he/she comes to the showroom. For all they know it could be made of paper with a lollipop stick frame.

    The same will apply to online shopping at the supermarket. As a store owner I will know what a tin of beans cost me and what my competitors are charging for the same thing – it isn’t a lottery – while providing advice certainly is. Do you want a pension? Have you already got one? Who with? What’s it worth. How much are you contributing? Does your employer contribute? Have you thought of Salary Sacrifice? When will you retire? And so on and so on – loads of information that certainly impinges on the amount and cost of the work undertaken.
    So is it therefore surprising that adviser web sites don’t quote prices?

    I feel that you are being more than a little unfair in this case. Although as you say in your opening comments – it does make good copy!

  6. Wise points well made. The knee jerk reaction that most of us had to the Which? report was to criticise it and make points about shops and cars. But actually the idea of APFA going back to Which? is much better, shows engagement and requires them to come up with a positive solution.

    It’s really hard to come up with a formula that can give consumers an indication of costs so they can compare advice firms, both without putting them off or selling them something that turns out to cost a lot more. We don’t publish our fees for this reason.

    So Which? How should we do it? Come up with something workable and we will run with it.

  7. The problem as always is how long is a piece of string, you can only give estimates and these can sometimes be way too little or too much, very rarely one hundred percent correct.

    You cannot compare Financial Advice with retail goods. Firstly there is no tangible item to hold or touch, until you receive the advice you will not know what you will want or need, neither does the adviser. Based on this premise how do you produce a price list.

    What ‘Which’ and many others outside the financial advice profession fail to understand is there is no such thing as the typical client or case. They also do not understand that to actually write out any meaningful cost list that a client could use with any certainty would require a novel and a degree in physics to understand, calculate and that is based on them KNOWING what they want. I would suggest the reason they are seeking advice is they do not know what they want.

    The only way to itemise any fees would be to charge per hour, per section of work completed and then for the advice. So ‘Which’ what is it you want to cost, investment, full financial review, how many policies/investments do you currently have, what do you want (you don’t know this yet do you! and neither does the adviser), what is the liability to the adviser? Is it low risk simple advice, high risk complicated advice?

    I would suggest that nearly every firm, adviser offered “an at their expense meeting”, to look at and then explain their charges. We do not avoid the issue or are we trying to hide our charges, we try to do it fairly, with at least some knowledge of what may actually be needed to be completed.

  8. One problem associated with publishing your prices is that it allows the untutored to make the unreasonable assumption that the cheapest must be the bets.

    Sometimes it is but often it’s not. Do we really want to inhabit a land where price dictates behaviours and quality and value become lost targets?

    The counter-argument is that punters, as Nic likes to term them, cannot assess quality from a web-site. Maybe this is why I and many others do not advertise, do not seek to gain clients from glitzy websites but rely on recommendation, word of mouth and the tried and tested mechanism of doing a sufficiently good job that existing clients keep returning.

  9. Nic, your retail comparison is interesting. If you just ask the retailer “how much will it cost to refurbish my bedroom?”…I’m guessing the answer would basically be “it depends”. With retailing it’s possible to list all the various options, different qualities / sizes / choice of materials / delivery / fitting options etc. You just have to tell the retailer either by inputting the info online or getting a quote.

    Perhaps we need a software provider to come up with some sort of computer programme that puts the costs together in the same way, input all your requirements/relevant info and it churns out the total costs.

    Or maybe industry standard scenario/s…which we could all price up – bit like the mpg tests that cars go through…..(errr, perhaps that’s not the best example….)

    Or as Martin suggested, a tome full of if’s buts and maybe’s.

  10. Personally I couldn’t give a monkey’s about what which? says. They may well be a not for profit organisation but do not let that fool you into thinking they are a goodie two-shoes crowd. Its all about sales/subscribers and advertising for them, which is fine but to pontificate and say they are all about the consumer is a pile of crap IMHO. I really wouldn’t want any new clients who may pick me based upon what they see I charge. Experience over many years has proved to me that those who base their own decisions purely on price, value what I do the least. They have in the past been a lot more hassle than they are worth. I refuse point blank to negotiate unless it turns out the client has a huge amount of money to invest but this isn’t known until a bit down the line of my process. Like a lot (possibly the majority) of advisers, I service existing clients and only take on new clients by way of referral. Unless I know exactly what the person wants to do before I meet them, I have stopped even mentioning anything about what I charge until after I go through what I offer to see whether or not I can be of use to them. If they want to use me then I go through what a typical price for doing this will be but stress they will not get final figure until I determine exactly what is involved. So to publish what it will cost them is impossible. In fact I would say it is actually not transparent by publishing these because we could be miles out and that would not fall under the TCF banner very well

  11. Robin Goodfellow 2nd November 2015 at 3:58 pm

    As a potential client (not an adviser), I wouldn’t expect to see a set price list on an adviser firm website. A “menu” would cause me much more concern as I would be worried that you get the same service regardless of circumstances and needs. A case study or two showing the range of potential complexity/costs involved would be useful for creating a basic understanding, but not essential. I would be more interested in the Who are we?/What do we do? sections and any verifiable client testimonials!
    I have always seen your professional fees as similar to those of a plumber/mechanic etc. “I have a problem that I need you to help me with, can you come round/I come and see you and give me/get an estimate please?” You don’t ask a plumber to price a job without telling them what it entails? The retail analogy used in this article doesn’t stand up to more than a second’s serious thought.

    • But wouldn’t you at least want to know if the plumber / mechanic would be charging some form of fee regardless of if you were to take their advise and carry out the work for you?

  12. The key issue I believe comes from the complete lack of understanding regarding the ranges of costs that financial advice could entail. If I take my car to the garage because there is a problem I don’t know the cost beforehand but I do know that a new exhaust will cost a couple of hundred, a replacement water pump may be a bit more and that a new engine will be a few thousand etc.

    I people realised that advice on a single investment will be £500-£1000, a pension could be a few grand and complete wealth management will be 3% of all the money invested (for example) then there would be less confusion.

    These are not exact numbers, as these won’t be known, but the simple fact is many people just have no idea how much financial advice costs, and that in itself is a barrier to them engaging.

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