Commenting further on Dan Farrow’s letter inYour Shout (FA, 17 June), much has been talked about the ‘advice gap’ and how everyone can get good quality advice. The issue is one of affordability both from a client’s and adviser’s point of view.
Thinking about my 28 years in the industry, much of the problem has been caused by greedy principals with little principle. Attached to a firm in the 1990s, I was told to take maximum initial commission, and renewals were not worth having. Just 20p in the pound was paid to us and the owner truly believed he was being generous.
I now run my own business. Taking out the greedy middlemen, I can still make a good profit advising somebody with modest amounts of capital. Some professional firms charge flat fees – say £750 for advice on any size of investment – and then have reasonable ongoing servicing fees for reviews. I can see clients regularly without needing to sell anything new, and give sound advice because of fair recurring fees.
I have met people at seminars and their opening line is: what are your recurring fees, and if you come and work for me I will give you half of them. One large IFA wanted me to bring my business to them and charge me £7,500 a month. Why anyone thinks that I would give them my business and £90,000 a year for a desk in their office is beyond me. This is where Mr Farrow’s ‘double dipping’ and the advice gap really stems from.
Running my own business means I have control over whether a case is affordable. Computer systems I buy are as effective as any a national firm can offer. Working for a firm with charges described above just does not make sense if you have any ability yourself to run a business.
Until the industry deals with the sheer level of greed and unrealistic expectations of some owners of firms, the advice gap will continue.
Chartered financial planner,