You want clarity? Advisers need to take a look in the mirror, says Gill Cardy
Okay, it’s over 12 months now since the implementation of the Retail Distribution Review, which if you remember had the stated objectives of “improving the clarity” with which firms describe their services to consumers (Independent or Restricted); addressing the potential for adviser remuneration to distort consumer outcomes (adviser charging); and improving the professional standards of investment advisers (new minimum qualification standards).
So it’s disappointing that when a recent adviser survey run by a trade publication for financial advisers asked its respondents to describe themselves, they came up with six answers. ‘Independent Financial Adviser’ figured most highly, with around 60% of the answers; but other responses included ‘investment adviser’, ‘wealth manager’, ‘fund manager’, ‘financial planner’, and the mysterious ‘other’.
‘Restricted adviser’ wasn’t even an option on the list of choices, so maybe the ‘others’ were indeed Restricted advisers. But in a world where there is supposed to be this improved clarity, why are we finding it so hard to say that we are one thing or the other? And while’ for marketing purposes’ we may wish to emphasise alternative aspects of our proposition – such as wealth management, life planning, financial planning, wealth management, asset management, etc – the simple truth is that firms are either Independent or Restricted. And the sooner that all aspects of financial services make this clear whenever we write in magazines like this, whenever we advertise for new clients or whenever we conduct market research.
Evasiveness over Charges
What was more surprising, however, were the views on whether adviser firms should be forced to disclose their charges on their websites. I find it practically impossible to find disclosure information about services and costs on firms’ websites. On some websites, if you drill deep enough you can eventually find a sample client agreement and disclosure document. But on others it’s simply not there at all.
On this question in the survey, only 34% of advisers said that charges should be disclosed on websites, while 53% said that they should not. One firm added that this was “commercially sensitive information”, while others said that “no other profession does”, and that “accountants and solicitors do not have to do it”. Other reasons given were that “advice is not about cost” and that “we don’t have standard charges”.
It’s Not Fair, Miss
Now, I’ll agree that if you have a charging structure based on hourly rates or project fees, then it is almost impossible to quote a standard fee. But there should surely be no reason why a firm cannot quote sample charges or typical project costs, as the FCA rules require?
As it happens, we know that the vast majority of firms have elected to make use of a percentage-based charging model. So disclosure in these circumstances should be simplicity itself.
As for the claim that “other professions don’t have to disclose their charges”, some practitioners actually do decide to disclose them, whether they are required to do so or not. And anyway, since when was the fact that “no-one else does it” a reason to avoid doing the right thing?
Who knows? Perhaps the lawyers, the accountants and the medics might benefit from us if we could lead the way on transparency. Because it’s the right thing to do.