Various questions have been raised, particularly about ‘hidden’ or additional costs; what are you actually getting for your money; how will the ‘price war’ affect the advice market and so on.
My take on it is most people simply don’t care. An inflammatory statement perhaps, but let me explain.
I suspect a large majority of professional, client-focused advisers who have embraced the new world of RDR and recognise the future is bright, not Orange, will have a broadly similar charging structure: an initial fee for preparing the planning report of about 1 per cent or a fixed fee, together with an annual fee of 1 per cent or thereabouts.
Some potential clients challenge these fees without considering the long-term benefit that will be derived from the relationship. They know the cost of everything and the value of nothing.
Spare a thought for the thousands who sign up to St James’s Place and are charged between 4.5 per cent to 5 per cent initial and between 2.1 per cent and 2.3 per cent thereafter (this is for both advice and fund management).
So why do they pay? Because they perceive it to be good value.
We get hung up on charges but our clients don’t. If you think something is worth having you will pay for it.
You don’t join Coutts or some other private bank because you think they are outstanding financial planners and investment managers, you sign up to status, prestige and the ticket to Henley and Ascot. Their clients are unlikely to question the costs or even ask.
Hargreaves Lansdown is a successful company because it provides what its clients want. Fidelity has been doing the same for years and other providers too.
This is a market comprised of many different players providing many different options and those with any sense should embrace it.
I leave you with the wisdom of Victorian thinker John Ruskin:
“It’s unwise to pay too much, but it’s worse to pay too little.
“When you pay too much, you lose a little money – that is all.
“When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.
“The common law of business balance prohibits paying a little and getting a lot – it can’t be done.
“If you deal with the lowest bidder, it is as well to add something for the risk you run. And if you do that, you will have enough to pay for something better.”
Neil Shillito is director at SG Wealth Management