Advisers told to soak up platform charges

Advisers told to soak up platform charges

Advice companies should soak up platform charges to drive down investment cost and increase returns for clients, an industry professional has said.

Speaking at a Next Wealth conference in London today (March 26) Lee Robertson, founder of Octo Members and former chief executive of Investment Quorum, called for a new model of advice.

He said if he launched an advice firm today he would do it on a different charging structure which would cut fees for clients and impose limits on what can be charged.

Mr Robertson said any "thoughtful" adviser should be addressing adviser fees and charges in the interests of clients. 

He said: "Can we genuinely say as advisers, to our client, yes the complexity of your affairs has doubled? The risk to us from running your portfolio has doubled, therefore I have to charge you?

"I just don’t think that looking at a clean sheet of paper, with no commercial interest at all, would I as a client be comfortable with the reduction in yield figures?"

Mr Robertson said the difference between some structures currently in use was "monstrous".

He said he had spoken to a technology provider at the Next Wealth event who had shown him an illustration of his pension.

He said: "If he just went into a managed fund at a reasonable cost, of which there are many now around, compared to a discretionary fund manager fund, the reduction in yield was monstrous." 

Mr Robertson questioned whether rising adviser fees and the subsequent lower returns for clients was in line with the "client centric" approach most advisers say they have adopted. 

He said: "Let's say I look back on investment and in the managed sector over the last ten years it's pretty much doubled your money, which means adviser fees have also pretty much doubled in the last ten years.

"But the thing about adviser fees is they are client charges. They are a reduction in yield applied to the client.

"Then I look at what the returns have been to a client, that’s the growth element. Then we look at the reduction yield element and the reduction yield element is running at twice that of returns to client. Is that client centric?" 

Mr Robertson said it would be a "big win" for a client if an adviser could put them in a charging structure for fund management that is cheaper than the one they are in today. 

With fund managers under price pressure, Mr Robertson said advisers will need to somehow "square the circle" and reduce client costs. 

He said: "I would probably be talking to clients about flat fees, potentially, I might be talking about income based fees.

"I might be talking about cap and collar fees, in that once they get to a certain level it is wrong for me to charge that much to the client because it is just pure massive profit - larger clients will respond to that."