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
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