The FCA is on my RSS Feed so in popped the FCA 17/18 Business Plan, Sector Priorities, Retail Investments. I have picked out one sentence to share with you under the heading "Outcomes We Seek": "Transparent product features, risks and charges, lead to increased competition in the sector."
If this comment is directed at fund managers and product providers I wholeheartedly agree and support every attempt for their costs to be published openly, transparently and easily accessible, as it is often difficult to compare the cost of investing. Advisers need an industry pricing protocol where "types" of cost are precisely defined; we need to know what each price description means. It is the only way for advisers to accurately analyse the cost to the investor.
I do not believe advisers should publish their fees online or that advisers should be encouraged to enter into a price war. The cost of advice displayed as a £ sign does not describe the intangible value of considerable experience, depth of knowledge and personal skills the adviser has to offer; this can only be done with human interaction. The client agreement received by a prospective client sets out the cost of advice; this is "transparency". It would be a very foolish adviser who did not have a client agreement in place. The client decides if what is offered is of value and affordable; there is nothing opaque, it is crystal clear.
Price in any market is a function of demand and supply. Advice does not have to be cheap, it has to be available. We need to give consumers choice by supplying access to a range of advice from robo to bespoke. Consumers will purchase the product that gets the job done for them at a cost they can afford where they feel they are getting value.
The problem is not the cost of advice, but understanding the value of advice. The market will find the right price.
If this happens then the FCA's "Issues" that follow the "Outcomes We Seek" will be achieved. Financial advisers may give insufficient attention to the total cost of investment products and of advice, which results in poor value for money for consumers.
Investors with modest means might lack access to, or awareness of, advice that could benefit them.
Susan Hill is a chartered financial planner of Susan Hill Financial Planning
