Some advisers are over-charging their clients, according to True Potential’s senior partner Daniel Harrison, who also questioned whether investors in low-cost products are getting good value.
True Potential is one of several firms working with the Financial Conduct Authority’s advice unit on an automated proposition which could help fill the advice gap with lower cost options.
True Potential offers a pure advice service and a direct-to-consumer service, with clients of the latter able to speak to an adviser.
Mr Harrison said these clients generally pay less because advisers forego the initial charge for these clients, making it cheaper.
He went on to say that even True Potential’s full advice offering is cheaper than average.
True Potential's advisers charge an average of 0.56 per cent on an on-going basis.
Mr Harrison said: “As a rule of thumb advice in the market always seems to add up to about 2 per cent.
“I don’t mind that too much if it is fair, but I don’t see it being particularly fair all the time.
“An adviser will sometimes put a client into a low cost option and round that figure up to 2 per cent.
“So you can find an adviser charging more than the cost of the fund and platform, and this is where you get into the muddy waters of good value.
“The adviser may say they are worth 150bps of ongoing fee but they might not be using technology or processes efficiently.”
True Potential currently offers a number of online services which allow clients to create their own budgets and save small amounts on impulse.
Mr Harrison said his company is currently working with the FCA on a system which could make suggestions based on how much someone is saving and how much they would like to put away.
He said: “That side of things is where we are engaging with the FCA, where we start to prompt the client and work to better understand them.
“It becomes a grey line if a system tells you to do something. Where does the regulatory onus sit? Does it sit with the adviser who put the client onto the portal or does it sit with True Potential?
“That is where we are looking forward to working with the FCA.”
