Advisers are charging a third more than what the average wealthy investor is willing to pay for advice, new research has found.
According to research from Legg Mason, the average wealthy investor is willing to pay a maximum of £110 an hour for financial advice, which the firm admitted is “firmly at the lower end” of what financial advisers currently charge.
However, data collated by intermediary database MyTouchstone showed that for the first half of last year, the average hourly rate advisers were charging was £165.70. This means wealthy people will pay 33 per cent less an hour than average fees.
Legg Mason added that recent reviews of the advice industry indicate prices can range from as low as £75 per hour to as high as £250.
Legg Mason’s annual global investment survey also found the key reasons cited for using an adviser are: the opportunities they provide to improve investment performance (48 per cent); the help they give to help investors avoid costly mistakes (46 per cent); and to provide access to a variety of investments they would otherwise not be able to buy (44 per cent).
Adam Gent, head of UK sales at Legg Mason, said: “The survey suggests there is a significant mismatch between what advisers charge for their services and what investors are willing to pay. This implies the industry has far more work to do to highlight the value of advice in an environment in which upfront fees have replaced the old commission model.
“The survey also shows that investors appreciate advice for a variety of reasons, some of which are obvious and some less so. It is surprising, for instance, that there is a lack of desire among UK investors for a formal financial plan, but perhaps less of a shock that clients use advisers to help them avoid making mistakes when choosing their investments.”
Adviser fees have been a bone of contention, particularly in the post-pension freedoms market. FTAdviser revealed last week that some financial advisers are being asked to sign documents stating they have given advice for defined benefit pension transfers when none has been given.
None of the advisers spoken to by FTAdviser agreed to produce the letters, but it was generally supposed the ‘clients’ were seeking to avoid paying potentially more than £1,000 to get formal advice which would likely advise against a switch.
donia.o’loughlin@ft.com
