It has been four years now since the Financial Conduct Authority published its post-Retail Distribution Review study into adviser charging, and it should think about it again.
This time, though, it should do it better.
The FCA’s survey of companies providing financial advice looked at 233 in total, making up around 21 per cent of advised businesses.
We do not know which major companies took part, but with these things the biggest ones normally do.
What it revealed was that the median ongoing charge was between 0.5 per cent and 0.75 per cent, while the median initial fee was 3 per cent.
The more a client invested, the lower their fees, another perfectly standard finding.
The study was good in that it showed you the state of the market.
It was ineffective in that it did not really show what clients were actually paying, because the study only encompassed advertised charges.
This is where the FCA should look to compile a much more detailed study.
I seem to write a lot about value and client outcomes and how the two issues are correlated, and that is because I know it is an issue advisers spend a long time mulling over themselves.
Perhaps it is due to this age of self-investing and passive funds, where showing additional benefit from advice is so hard to ascertain.
On costs, advisers are split.
There are those who advocate publishing their charges in a transparent manner on their website, and there are those that do not.
Likewise there are those who think you should only charge what you advertise, and those who think customers should be able to haggle and, if reducing your fees secures a client, then you should be able to do that.
In the first case, I think total transparency is everything.
In the second, I am more on the side of the hagglers.
Why should those in the know be allowed to ask for a cheaper ongoing or initial charge? This is just the market at work.
This is where having a survey of real rates customers are paying would also be helpful in that it would provide greater transparency into a market that, frankly, most normal people know little about.
Also helpful would be greater insight into the way charges are implemented.
I would like to know the real rates on typical pairings of fees, for example, initial and ongoing.
And it would also be helpful to know when initial charges are being imposed: is it just on the first lump sum, or is it monthly contributions?
I know cases where simply moving money between funds counts as an initial charge.
This kind of wealth destruction is where customer harm can be done, particularly where a number of businesses do not implement charges in the same way.