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Nic Cicutti: Advisers seem unable to provide basic info on costs


Last week, after weeks of discussions with architects and surveyors, not to mention endless meetings with local planning officials, we finally submitted a planning application for an extension to our burned-out cottage.

Now the most recent drawing from our architect matches what we and the planners want, increasing the likelihood of its eventual approval, we have been trying to obtain estimates for the work from various builders.

You might imagine a tendering process where the initial groundwork involved and materials specified in the build are identical, should allow a reasonably accurate way of assessing the price we are being quoted for the job.

Apparently not: some estimates do not even refer to key aspects of the work and more detailed breakdowns are usually absent, other than an unspecified sum we are told will be the overall cost of the rebuild. When we rang one or two of the builders and asked for more details, they treat our call as a personal affront.

At this stage, one company is definitely not going to get the work – the one which gave a five-line emailed response, with an admittedly low price yet unsupported by any evidence, a request to visit the site or even discuss our requirements over
the phone.

All the above leaves me with a huge feeling of affinity with prospective clients of the financial advice firms which, according to the FCA, are unable to give even the most basic information as to how much their services might cost.

In its latest thematic review, in which it looked at a sample of 113 firms –from small financial advisers to networks and large national advisers, banks, wealth managers, solicitors, accountants and even some general insurance brokers – the FCA found almost 60 per cent failed to give clients clear, upfront generic information on how much their advice might cost.

The regulator says firms using a percentage-based charging structure did not provide examples in cash terms. Almost a quarter failed to disclose their initial fees and 30 per cent forgot to mention their ongoing fees.

Some 73 per cent of firms that used an hourly rate did not provide an approximate indication of the number of hours that the provision of each service was likely to require, making it impossible for clients to assess how long it might take for their particular need to be met.

The same poor approach to charges disclosure applied with regard to client-specific information, with half of all firms surveyed failing to meet the FCA’s requirements.

A quarter of firms using percentage-based charges did not disclose the fee in cash terms and four in 10 did not see fit to do so in respect of ongoing fees. In a fifth of cases, the FCA says client-specific information was not disclosed “as soon as practicable”, although it does not specify what this means.

In a third of cases, firms failed to give clients a clear explanation of the service they offer in return for an ongoing fee, not to mention their right to cancel this service at
any time.

Believe it or not, when I read the details of the FCA’s thematic review, my initial response was one of vague sympathy for advisers. After all, it is difficult to cater for every eventuality in respect of how much a client might have to pay for a service.

Moreover, as some of the responses to this story on Money Marketing’s website have pointed out, everyone has different preferences in terms of how financial information
is given to them. Some understand percentages better, others are more partial to lump sum breakdowns.

And, as one or two advisers reminded me when I spoke to them about this issue last week, the FCA has not always been clear when it comes to the implementation of aspects of the RDR, creating confusion about its requirements.

That’s as maybe but the problem is that very little of this confusion applies with respect to the key issue of charges disclosure for advisers.

This is the FCA’s second thematic review on the subject. It is being published more than 15 months after the RDR’s introduction and nine months after the first published review in July last year. The regulator has also tried to offer examples of good practice to help advisers who want to know how they might meet their clients’
needs in this area.

If a key supposed benefit of the RDR – that of being able to compare advisers’ charges and make appropriate choices on the basis of service as well as price – is not being met, my guess is that when it comes to the third review, some time later this year, it is certain that the FCA will be referring any ongoing failures to its enforcement division.

Yes, in the case of our house it is easy to be very specific about the price of a job based on a detailed schedule of works. Advising a client about his or her finances is potentially much more complex.

In both cases, however, advisers should be aspiring to deliver the best possible clarity on fees. That is what being a professional is all about – if you can’t be transparent about that, why should a client trust you with the rest of his finances?

Nic Cicutti can be contacted at



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. goodness gracious 17th April 2014 at 2:27 pm

    Nic, will you accept the lowest quote for your re-build, or will you strike a balance between a recommended builder and price?
    This is where the FCA have some issues. It is not worried about how much advisers charge, but wants clients to be able to compare them. Why?
    Perhaps they want to see a website, with Russian snakes complaining that their website is overrun?
    No business worth it’s salt employs a cost plus pricing model, but will price according to the market. You make more on some transactions than others, just ask lawyers, accountants, even doctors, estate agents et al. But the FCA, staffed by people who have little business experience, fail to properly understand.
    But inevitably some builders will price high so they do not get the job, or are they are factoring in the additional business and reputational risk of doing work for a consumer champion?

  2. “A quarter of firms using percentage-based charges did not disclose the fee in cash terms and four in 10 did not see fit to do so in respect of ongoing fees. In a fifth of cases, the FCA says client-specific information was not disclosed “as soon as practicable”, although it does not specify what this means.”

    The problem is that unless you are doing a straight forward investment, the adviser wont know sufficient information at the end of a fact finding meeting to make an accurate estimate on costs. If you are undertaking a pension review process, clients often don’t have a clue as to what they have or what its worth. So if they don’t know how can an adviser give an estimate of the initial and ongoing costs if they work on a % basis?

    We’ve had plenty of clients that weren’t even aware they had pension benefits with previous employers and its only that we get letters of authority to inquire that we’ve uncovered retained benefits.

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