In this week’s Money Marketing, the Editor, Natalie Holt, wrote an interesting piece about fee transparency among the largest advice firms. It was a good article making an important point – simple requests for information about initial and ongoing advice fees were met with reluctance to divulge details. While I agree with the main thrust of the article, there would be one point I would add – the reluctance to be clear about charges is not restricted to the large firms. A simple trawl through adviser websites will offer up very little in terms of details regarding fees.
And this is not a new phenomenon. I wrote a small blog about fee transparency in February 2014. The point then, as now, is a request for fee information is almost always met with a bland, all-encompassing statement along the lines of “our fees range from 1% to 3% depending on the complexity of the situation”. Really? A “Cover Star” on a recent New Model Adviser edition stated their ongoing fees were between 0.5% to 3% per year – “It depends on how much work the client requires”. 3% per year? Under what conditions can you possibly justify charging 3% per year to look after someone’s investments?
Anyway, I digress. The point is not the level of fees, but the unwillingness to spell them out at the start. As a potential client, I would want to know, preferably before I approach the firm but certainly before I spend time meeting advisers, how much my investment is going to cost. That doesn’t seem an unreasonable expectation, and any attempt to avoid answering that question must be met with suspicion.
Advisers will say they need to be vague because everybody is different, so they don’t know up front how much time they will take up. But that is disingenuous. Any adviser who has been in business for any length of time knows how to fact find, collate existing policy information and formulate advice. We know how to risk profile, asset allocate and build portfolios (for those of us who actually do that, rather than outsource to a DFM – which would take even less time). So it doesn’t seem unreasonable to make an estimate of how much time MOST clients need, and then set fees on that basis. As with all businesses, some clients will take up less time and others will take up more. That is the nature of business and the purpose of setting your own fees.
Finally, but crucially, show those fees clearly on a website, or any other client-facing platform. That would allow the client, before they pick up the phone, to assess your service and decide what value for money you offer. They may even compare your fees with other adviser’s. Although given the high fees mentioned above, perhaps that is why there is still so little fee transparency.