CompaniesApr 4 2014

Ex-SJP ‘partner’ says advice cheaper post-RDR

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An independent adviser and former partner at restricted advice giant St James’s Place describes what he sees as a cost conundrum for the sector post-Retail Distribution Review: advice has actually fallen in price, but clients believe their fees have gone up.

In FTAdviser’s weekly Friday Interview, to be published later today (4 April), Tim Horrocks, managing partner at newly launched IFA RockWealth LLP, said advice was more expensive to clients in the pre-RDR world due to the percentages that advisers charged.

He said that many advisers had reduced the level of fee they were taking to remain competitive, while others such as his own new venture have introduced flat hourly fees which have reduced the overall cost for most advised clients.

Mr Horrocks said: “I think clients find it more expensive post-RDR, even though I think it’s a lot cheaper.

“Now we don’t charge percentages. A client investing £200,000 would have paid £6,000 to invest £200,000... some firms would have been paying 6 per cent on that and then we are talking up to £12,000.

“Our fee for that is never going to be anywhere near that level. If we are talking a standard piece of advice and using general investments and Isa accounts for a £200,000 investment you are probably talking about £2,500/£3,000 for a maximum fee.”

Cheltenham-based RockWealth works on a fixed fee basis; hourly client fees range from £75 per hour for support staff through to £225 for a senior partner and the ongoing charge is 0.75 per cent.

In terms of the shifting percentages being charged, Mr Horrocks said “there are all these different formulas now”, highlighting the shift to ongoing fees at some firms that are charging more like 1 per cent plus 1 instead of the old 3 per cent plus a half.

However, Mr Horrocks is of the view that there is not a “level playing field” in the market believing that some firms are still working on what could be described as a commission basis.

He said: “[Some firms] are still able to effectively pay commission and have 100 per cent allocation where the rest of the industry have clients that pay fees. It will be good when we are all working on a level playing field.

“If I was going to argue the case that my clients can have 100 per cent allocation and yet I can still get paid a £4,000 lump sum for giving advice, I don’t think I would get very far.”

Last year, FTAdviser reported on questions that had been raised over Mr Horrocks’ previous employer SJP’s charging, with investors often still being charged a single investment fee from which both product and adviser remuneration is taken.

St. James’s Place has always maintained the regulator is aware of and has approved its charging methods.

A spokesperson said at the time: “St James’s Place is a vertically integrated business, meaning we offer clients a fully integrated service comprising both individual and bespoke advice and our approach to investment management.

“As a vertically integrated business, we facilitate the payment of the advice from the charges we take from our clients’ investments. The cost of our advice along with the other costs of doing business, such as the costs of our services and those of our fund managers, are included in the charges clients pay and is not an additional amount.”

The full interview with Mr Horrocks will be published later today (4 April).