IFA hits back: ‘Industry naysayers denying need to change’

We saw the inevitable negative comments but we also had a few positive comments and tweets of encouragement

This industry is full of naysayers denying the need to change. But to balance that, there seems to be a growing number of firms who are positive, innovative and engaging with the future – they will be tomorrow’s IFAs.

So rather than this being a sort of right-to-reply or rant, I wanted to be positive and offer up a challenge to any firm who doesn’t want to engage with ‘lower-value’ clients - offer them to us. We’re happy to contact them and take care of your FCA obligation to inform them of the sunset clause and the implications on their investments.

To help with that challenge, let me clarify four basic points which we feel are important:

Transparency

Any potential client can look on our website and work out exactly what fee we would charge for whatever part of our service they need. The fees are clearly sign-posted and explained, with no need to call us for an estimate. We think that’s important – if you want to build trust, you need to be open and honest about your fees.

Cost

This seems to be the contentious point so lets clarify what we’re charging.

We charge £250 for a full financial report, 1 per cent to build a portfolio, £250 to implement our advice and 0.5 per cent per annum as an optional ongoing servicing fee.

So, putting that together, if the client has £100,000 to invest and they want our full service, the initial cost would be £1,500 – 1.5 per cent. This is not a race to the bottom and some of the new-style fee models are very competitive for the larger investors. We have simply made the business decision to target the largest group of investors in the UK – normal people who have anything up to £100K to invest.

Advice for all

Part of our fees are calculated on a flat rate basis and that tends to penalise smaller investors. Now, we could have left it at that and taken the view that that’s not our problem but we didn’t want to do that. If you price out people with £50,000, they won’t come back when they have £200,000.

So we have the price promise; we are capping our total fee at 3.5 per cent and crucially, we’re not turning anyone away. We’re not a government agency and we’re not sponsored by anyone - we have no legal obligation to offer advice to anyone. But we are running a business and we want to provide access to affordable advice for all – not just the HNW.

Technology

My kids are in their late teens. They do everything online, usually with their phones. When they come to need financial advice they will expect it to be delivered online. That might mean DIY, but I think the majority will still want a person to deliver it. So the question is how does an adviser deliver personal advice over the internet?

Today it’s Skype and Facetime. Who knows what tomorrow’s technology will be, but it’s likely to be visual.

The sunset challenge

All advisers have an FCA obligation to communicate to clients the sunset clause and their options moving forward – even those ‘low-value’ clients not being serviced. So if you don’t want those clients, offer them to us. We’ll take care of your obligations and offer advice to all.

Craig Davidson is founder and compliance director at Devon-based Reckitt House.