Conversation about cost needs to be revived

In the pre-RDR world when fees were bundled into commission, financial advice was made to sound free. But all that led to was a world where consumers felt it had no value.

Despite attempts by some to persuade advisers to be more upfront about what they were really charging, a reluctance to confess just how much could be made from trail commission always got in the way.

Fast forward a decade and we are having the same conversations about costs all over again, and once again some advisers are trying to convince us that their advice is free.

Essentially, the argument goes, because you pay your fee from the sum invested, the advice bit beforehand costs nothing.

Advisers really need to start having a conversation about cost all over again

This is a very dangerous game and dramatically undermines the value of your profession because you are effectively saying it is worthless.

Incidentally, journalism has the same problem, in that for years newspapers gave away our stories for nothing on the internet.

It suddenly meant that any old blogger could pretend they were a journalist and people forgot that producing good quality news coverage actually costs a lot of money.

Advisers really need to start having a conversation about cost all over again.

Maybe it is time to start setting a gold standard by which to measure the services advisers offer.

As a starting point, and this is my personal view as a consumer, whole of market is best. I am sorry if that upsets restricted advisers, but if you are only selling a limited range of products from a provider then there is no way you are offering access to the very best at all times.

And I do not mean those who are restricted to the products they sell – specialising is a valuable skill – but the providers they offer.

This distinction is a problematic technicality for consumers. You have to think about perception, particularly if your restricted advice model comes with fees that are contingent on how much you flog.

This is where charging really matters. You can have an upfront charge, you can have an ongoing fee, have both if you want.

Charge a flat fee, charge a percentage. But whatever option you choose, think about how that looks to the consumer.

And this is where transparency comes in. I hear advisers argue all the time that it is just impossible for them to publish a sheet of charges on their website.

I am having none of it.

Not publishing fees makes it seem as if you have something to hide – it is all about perception.

You cannot unbundle these three issues – whole of market, charging structure and transparency – you have to look at them in the round to get a full sense of what your business model looks like.

Industry needs more clarity  

Andrew Bailey is trying to get his campaign to become governor of the Bank of England back up and running.

His latest bid to make it sound like the Financial Conduct Authority is doing more than it seems, is to moot the idea that retail investors should be separated from institutional investors.

This, he believes, will not leave consumers exposed to poor pricing if (or when) we have another Woodford-style flood of redemptions from a fund.

The Investment Association has also been mulling over this liquidity problem and has proposed an alternative solution – funds which block redemptions for longer periods of time. This effectively allows funds to invest in less liquid asset classes.

All of this is forced innovation, not innovation to meet demand. What the industry actually needs is more clarity, better communication, and more accountability.

If investors really knew where they were invested, if they could see more easily what was happening in the fund they invested, then we would easily cut through most of these problems.

If Mr Bailey wants public support he needs to show that he is on the side of the consumer by making sure his own organisation is more transparent too.

Regulator finally takes heed 

The concept of mortgage prisoners is a classic piece of well-intentioned regulation creating extra problems.

That some people cannot remortgage to a lower rate than the one they are currently repaying because of new affordability criteria really sums up the stupidity of some laws made post-financial crisis. The added idiocy is how long it has taken the FCA to get round to this.

This issue has been kicking around for a decade now but it has taken this long for the regulator to listen.

Meanwhile, those locked in worthless mortgages they cannot afford remain facing even more crippling financial burdens.

James Coney is money editor of the Times and Sunday Times

@jimconey