Proving the value of advice is the single biggest challenge to the advice industry according to a survey conducted by Axa Life Invest, which also pointed to strong support for new mechanisms to allow clients to compare advice costs.
In a survey of more than 200 advisers, more than half (54 per cent) said it is important for clients to be able to compare the costs of different advisers.
Some two-thirds of advisers responded that proving the value of what they do is the biggest challenge they face. Only 3 per cent of advisers questioned strongly disagreed that intermediaries need to prove their worth.
Simon Smallcombe, managing director at Axa Life Invest, said the survey highlighted adviser acknowledgment that the principle of shopping around “applies to financial advice too”.
Karen Barrett, chief executive at adviser directory Unbiased, said the results highlight difficulties for customers in comparing the costs of advice associated with different firms on a like-for-like basis.
Ms Barrett said: “You can ask ‘how much is your hourly fee’. You can explain to the adviser what the job is you want and compare that way.
“But the problem is some people just need a general review of their finances or they have some money to invest and in those situations the costs can be quite different.”
Ms Barrett also referred to the 1,000-strong adviser directory recently launched by the Pensions Income Choice Association, saying it compounds the issue as it “doesn’t say at all what you get for that money”.
In addition to a requirement to operate panels or place business with firms that write, in aggregate, at least 75 per cent of the total market’s annuity premiums, qualifying advisers must disclose their standard fees to be listed, for which there is no charge.
The Pica directory has already drawn criticism from consultant Ros Altmann shortly after its launch last week, who branded it ‘misleading’ and criticised in particular the fees disclosure as she argued there is no explanation of what service is being provided for the charge.
“It gets back to that argument that cheapest isn’t always best,” Ms Barrett added.
Mr Smallcombe said: “One way that advisers can demonstrate their value is to show just how much better off people can be if they take the time to look at all their retirement options. On average someone who shops around can get 30 per cent more income in retirement; not an insignificant sum.
“We need to help the British public understand that when it comes to life savings, it pays to seek the advice of a professional. It is a fact that good financial planning leads to better outcomes; people who seek financial advice benefit in the long-term and are more comfortable in retirement.”