Debates about adviser charging have been raging for as long as I can remember. Questions about contingent charging, percentage-based fees, fixed fees and the rest have long been par for the course ever since charges disclosure became mandatory under the RDR.
There has been much said on the subject of what clients will pay for advice, and the disconnect between that figure and what it costs to deliver an advice service. But when it comes to actual amounts, in pounds and pence terms, there is no hard and fast rule on what clients should be paying.
As consolidation and acquisitions take hold across the advice sector, a gap is emerging in some corners between what a firm is quoting as the cost of its proposition and what is actually being charged. Given advice firms have free rein to set their own advice costs, with a view to eventually moving to the “ideal” charging structure, it can take a while for newly acquired firms to adapt to the new way of working.
We have tried to assess what is really going on with ongoing advice charges, but out of the 20 firms approached, only a handful supplied meaningful answers to our questions. The ever elusive transparency on charges post-RDR is yet to materialise it would seem.
Money Marketing has heard of several instances where wealthy clients are being charged £60,000 a year for ongoing advice, and in one extreme case, £80,000.
Obviously advice can be involved, complex and even span generations. As we have been informed on more than one occasion, there may be instances where this level of charge is justified. But is there a firm that can honestly say it is delivering value for money at £80,000 a year? It is doubtful whether the client is even aware of the true cost of their advice.
I am conscious that the focus of any adviser charging debate should be about value, not headline costs. In a way the FCA’s hands are tied on this, because as it has said on more than one occasion, it is not a price regulator and has no intention of becoming one.
But advisers will not escape the notion, rightly or wrongly held, they are in the business of asking for money for nothing until the extremes of advice charges are exposed and challenged.
Natalie Holt is editor of Money Marketing – follow her on Twitter here