Advisers' reluctance to provide guidance on the fees they charge is a “barrier” to the growth of the industry, according to Keith Richards, chief executive of the Personal Finance Society.
Mr Richards was commenting in light of recent research which suggested only five per cent of UK financial advisers disclose the likely fees clients can expect to pay for their services on their websites.
The PFS chief said the professional body for advisers has issued "good practice" guidance for fee charging, and wants to see more firms using it or risk turning off consumers used to being able to compare prices online.
"We do encourage firms to provide examples [of the fees charged for certain work] and highlight the lack of it can be a barrier to consumer engagement,” he told FTAdviser.
Advisers have been required to be completely transparent regarding fees and charges for a number of years.
But Mr Richards said the requirement to treat customers as an individual rather than offer a formulaic service or investment solution could be preventing advisers from giving more guidance on their websites about cost.
"Just giving [generic] examples could be misleading as the total cost of fees should be based on client specific needs and the amount of work involved," he said.
"Someone with multiple pension pots and investments in different places would require more work and analysis than a client of the same wealth value with just a couple to review."
However he said many advisers were moving towards providing examples as they recognised consumers need some idea of cost before making contact
"Otherwise they many be missing out on potential new clients," he said.
Research from marketing agency Yardstick found that of the 300 adviser firm’s websites it examined, only 52 mention fees at all, while only 5 per cent of the total disclosed the likely fees paid by clients.
This is a drop from the 35 percent of firms that disclosed some information about fees, though the dramatic drop is likely the result of a change in methodology - when Yardstick conducted the research in 2017 it simply asked advice firms via social media how they disclosed fees. In 2018, it researched a sample of 300 adviser websites.
The company said it then spoke to the firms that reveal fees online to ask for the rationale.
Those firms which responded said publishing fee data helps to build trust with potential clients, and also flushes out time wasters, as potential clients who object to the fees don’t proceed to the point of taking a meeting.
Yardstick also spoke with firms that did not state their fees on their website.
The most common reason cited by the advice firms was the fear it would lead to fewer enquiries.
Alan Miller, founder of SCM Wealth Management and the True and Fair Campaign for more transparency in financial services, criticised the Financial Conduct Authority (FCA) for what he said is the regulator's "disgraceful" lack of action on adviser fee disclosure.
“What is the point of the FCA conducting a Smarter Communications initiative as long ago as 2016 if two years later it ignores the fact the vast majority of adviser websites show no examples whatsoever to prospective clients of what the costs and charges might be.
"This flagrantly contradicts the FCA Smarter Communications paper which stated, ‘a predominately paper-based disclosure may not meet today’s consumer information needs’ and ‘[the FCA] agree, for example, that the use of websites can be useful source information for investors if designed with the consumer in mind’," Mr Miller said.
The FCA declined to comment.
Ray Adams, of Niche IFA in Newport, said disclosing fees on the company’s website probably brings him “several clients a week.”
But Paul Gibson, an adviser at Granite Financial Planning in Aberdeen, said his firm chooses not to disclose fees on its website, because "our work isn’t a commodity and therefore pricing reflects the work and service we deliver and to a fairly large extent is client specific".
"Most clients come to us on recommendations and whilst our fees I feel are competitive, they are coming for our knowledge, experience and care.
"‘Standard’ fees are explained at the first meeting but we caveat that we will be specific once we fully understand the client’s needs – often being in a position to give a more accurate indication of fees at that point.”
David.Thorpe@ft.com
