We might think that those IFAs who have found a charging structure that helps with their own self-worth and meets the needs of their clients would provide have found the perfect balance.
Those advisers who embrace a business model based on payment by fees, avoiding payments from any assets and only adding value through cashflow forecasts might believe that makes them happy. Unfortunately, it does not; they will only be happy when everyone else believes it.
As an industry we must question why we are not worth generous fees in return for providing product-based advice? A decent barrister will charge £5,000 a day, that’s £1.3m a year for what we may perceive as doing nothing more than talking in a court. Comparable to an IFA taking £50,000 for arranging a life insurance policy or a providing a new investment portfolio? Is the client not paying for the IFA’s product knowledge and skill in selecting the right products? Has this knowledge no real value?
The answer is yes, it does, it exhibits immense value. But the problem stems from IFAs whose self esteem is so bruised that they’ve forgotten the knowledge they retain and its real market value, so they fail to communicate this to potential clients. Instead, they seek obscure charging structures that not only confuse clients but actually limit their options while providing services that most clients arguably won’t even need.
Charging well-heeled people fees to tell them they won’t run out of money (a fact they must be aware of) and suggesting this will lead to the adviser into self-actualisation and fulfilment is complete drivel.