Opinion  

Disclosing the facts

Nick Bamford

Nick Bamford

Interestingly, the survey suggests that the average initial adviser charge is 2.67 per cent, probably because of discounting for higher invested amounts, but I suspect that was no different under the old commission model. Is a percentage of money to be invested charged because that is more easily understood by the client than the cash equivalent?

If a client is investing £65,000 and the adviser charge is 3 per cent, then is it 3 per cent because £1,950 sounds like an unpalatable sum to pay?

I joked at a conference recently that “50 per cent of consumers understand percentages and the other two-thirds do not.”

I do wonder if disclosure is as robust as the FCA thinks it should be. The FCA Conduct of Business rules are very clear about what IFAs have to disclose. COBs 6.1A.24 2 a) describes disclosure in cash terms (or convert non-cash terms into illustrative cash equivalents). In other words if the adviser charge is 3 per cent then it is also required that the £1,950 is disclosed before any transactions take place.

I suspect that one element of “RDR 2” is going to be about greater disclosure of the monetary costs of advice.

Nick Bamford

Chartered financial planner

Informed Choice

Cranleigh, Surrey