Research by the Financial Conduct Authority into retirement advice post pension freedoms showed wildly different charges for clients to access their nest eggs.
Research carried out by the regulator as part of the Financial Advice Market Review found initial charges for investment and retirement advice can vary between 1 per cent and 4.5 per cent on funds of between £30,000 and £50,000.
On the average pension pot - which according to the ONS is £47,100 - this means clients could pay an initial charge of anything between £471 and £2,119.
I am sure you all found the findings interesting – and compared the figures to your own charges.
But ultimately what did we learn from this FCA study?
The financial services regulator seems obsessed by finding out how much you charge your clients but doesn’t dig deeper to find out if the fees are justified.
This focus on price rather than value is damaging to the financial advice industry.
Some people want a quick fix and won’t pay more than a few hundred poundsImagine this: the Food Standards Agency publishes their findings on how it costs to buy a beef burger.
What do they find? Most people pay just £1 while some are wiling to pay as much as £10.
Why such a massive variation in the cost of a beef burger?
Well, just because two products are called beef burgers does not mean they are alike and should cost the same amount.
Fast food chain frequenters will want to spend no more than a couple of pounds on a hamburger patty and are happy to eat heavily processed meat in order to save a few quid.
Those who want a handcrafted burger containing beef sourced from local farms and with the freshest ingredients and sauces made from scratch, every day, will happily pull a note out of their wallet rather than just coins to enjoy this dish.
The same applies to financial advice. Some people want a quick fix and won’t pay more than a few hundred pounds.
Others realise by spending four figures they can use your expertise to save themselves a far greater sum in avoidable tax bills or generate a great deal of cash through shrewd, well-timed investments.
The regulator should look into is whether fees are justified rather than just show how little and how much you could spend on something.
There is nothing wrong with charging a high price for a top-quality service.
There is a lot wrong with serving up a mass-produced, poor-quality beef burger and claiming it the finest cut of steak.
