I
was doing some research yesterday, looking at online financial advice. The good news is there
are more sites cropping up offering access to online financial advice. While I
obviously believe that is a good thing, I was struck by the lack of
transparency about fees.
It
still seems incredibly difficult to get a clear, concise quote as so how much
advice will cost. Most sites either don’t link to their fee information at all,
or suggest the fee can vary depending on your personal circumstances. There is
logic to this – without knowing your personal situation, tax position, risk
profile, previous investment experience, etc, etc, it is difficult to judge how
much time an adviser will need to put in to provide the advice required and
therefore what to charge.
I
put this problem to an accountant friend of mine who charges set fees for drawing
up client’s end-of-year accounts. Without knowing how complicated the accounts
will be, how can he know what to charge? The answer was simple: He has been
drawing up accounts for 30 years. He has enough experience to know how much
work is needed for the average set of accounts. He then adds in a suitable
margin, and that’s the set fee. Sure, there will be some that take longer and
eat into his profit, but there will also be those that are much quicker, reinstating the profit average.
Any
decent financial adviser will know how much time the average investment takes,
and therefore should be able to set a fee. So, if you’re looking for online financial
advice and wondering how to judge one firm from another, I would suggest a good
first step would be how transparent they are about fees.