Are you being told what you need to know?


Are you being told what you need to know?

In a recent large scale investigation, the Financial Conduct Authority, (FCA), requested over 1,200 case files from 700 financial advisers to do an in-depth analysis of the suitability of the advice and the disclosure information given to the client.  The results of this study are now trickling out with a formal report due in June. (See the original article here).

First, the good news; the Financial Conduct Authority is generally happy about the suitability of advice, so the general public can be reassured that most registered financial advisers display a basic level of competence! What gets a little more interesting is the FCA’s findings around disclosure, in terms of charges, in a manner readily understandable by the client.

The bad news is that a reported two thirds of firms were considered lacking in clear, transparent disclosure, but so far there is no additional comment from the Financial Conduct Authority. Law firm Eversheds regulatory managing director said that concerns had been raised on the clarity with which advice firms were disclosing their charges and putting it into cash terms.

It is well known in regulatory and education circles that the general public has a blind spot when presented with numbers in general and percentages in particular. Putting a £ sign in front of a number gets a bit more attention, but people’s minds do not necessarily follow through with the logic.

As a fee based adviser, we are comfortable with putting our charges in Pounds and pence. Looking at our current disclosure document, we say;

“  Our fee for recommending and analysing and arranging a new pension/investment or platform service is typically 1% with a minimum of £1,000.

For example, the Specific Advice Charge for analysing a portfolio of ISA investments with a value of £150,000 would be £1,500. “

 We will normally confirm our fees, after an initial meeting, in writing by e-mail or letter giving a figure in Pounds and pence, say £1,710 on total funds analysed and managed of £300,000. Now working out the sums on this give a percentage charge of 0.57%, which is rather less than the more typically quoted 3%, as often quoted by competing advisers.

I am sure I have lost business, where the potential client has felt instinctively that 3% feels less that £1,710, but I am convinced that the only fair way of disclosing costs is with an actual number preceded by a pound sign. The feedback we have from the Financial Conduct Authority, suggests that I am on the right track.

If you would like to know more about how we can help you plan and realise your financial goals then contact us at info@martin-redmanpartners.co.uk or call us on 01223 792 196. 

The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.