The Financial Conduct Authority has been making noises recently about there being a lack of price competition in financial advice. Now I could talk about the lack of price competition in regulation, or the fact that we operate in a free market economy where consumers are free to choose and pay for the goods and services they purchase.
However, I thought it would be worthwhile highlighting why Investor Profile was set up all those years ago. I wanted to provide people with an alternative. To me, there was, and still is, a lack of choice when searching for a suitable financial adviser.
In the period since 2008, there has arguably been (with no data or research to back this up) a greater shift towards providing a similar sort of product and therefore charging charging in a similar way.
For me, much of the industry still operates a lazy charging structure. I don’t know of any other industry or profession that has such similar charging structures from one company to another. It’s very common for us to come across firms that charge 3% initial fees for investment and initial advice work and then up to 1% ongoing wealth management fees.
Now it may be that we just have a situation where so many firms simply work the same way and offer the same thing, in which case it’s reasonable to conclude they must also charge the same too. But what about accountants? Those I come across do have a reasonable variation in fees and that is often justified by a variety of factors.
So I suspect that the fact that we have such a lack of choice in charging structures within the financial advice profession is possibly down to laziness or lack of choice in the advice offering.
Coming back to why Investor Profile was set up. I wanted to offer something different. I saw it as my job to help people manage their wealth, become wealthier in all aspects of their life, and to make best use of their money. That needed to start with us. We needed to make sure our fees were going to give them maximum value for money. So I set about creating an ultra low cost charging structure with a variety of ways in which people could access high quality, honest financial advice, without having to pay the traditional level of fees. For the record, in comparison to the fairly standard 3% initial, we charge 1.1% initial, and instead of the fairly standard 1% ongoing, we charge 0.50% ongoing.
Now I’m not saying people shouldn’t charge for what they do. I genuinely believe in firms being free to set their own charges and they can be as high as they need to be, because ultimately the consumers will decide what’s right and fair for them. But I am disappointed by the lack of choice consumers have when needing to access financial advice services.
Now we hear the FCA is becoming more and more interested in how financial advice is charged for, I suspect it will attack the level of fees, but they’ll miss the point because the level matters far less than the variety of choice.