Last
week I saw an article in the financial industry papers suggesting that for an IFA to look after the
mass-market we had to be semi-altruistic. While I understand the premise, I’m
not sure I entirely agree with the description.
The
idea is that smaller investors simply can’t afford to pay the increasingly high
fees charged by the modern-day IFA. So, if IFAs wants to look after these
clients – and the evidence is that most don’t – they will need to exhibit a
certain charitable attitude, presumably by discounting fees or waiving them
altogether in certain circumstances.
Putting
aside the potential for insulting vast swathes of the investing public, I think
this view misses the point. Advisers have increased
their fees in such a manner as to alienate “smaller” investors. The focus is
entirely on micro-costing each stage of the advice process, rather than viewing
it as a whole. There is a push towards maximising profit at each stage, which
includes minimising work and liability where possible.
How
common is this example? An IFA who used to deal with everybody, set up
investments, pick the fund and earned 0.5% per year trail now segments his
database, focuses on the top-end clients, outsources the investment process and yet earns
1% per year ongoing fee. Undoubtedly he/she is more profitable, but is the new
structure fair? Is fairness even relevant?
Maybe
this comes down to individual choice. Does the IFA want a fat profit margin with a
few, select clients, or do they want a fair margin looking after the majority?
For me, doing business is about finding the right balance between profitability
for the company and value for money for the client. Both parties should feel
they are getting a good deal. Any client should feel they can look at our fees
on offer, decide themselves whether or not they are happy to pay them and make
a decision accordingly. Charitable status or altruism shouldn’t be part of the
equation.
Today
we launch our new online service – Reckitt House. We feel it’s clear, honest
and fair. I hope clients agree.
No comments:
Post a Comment