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Romer-Lee disputes cost pressure on advisers

Romer-Lee disputes cost pressure on advisers

The head of a consultancy firm has questioned whether advisers are currently being pressurised into lowering their fees, despite parts of the financial services industry feeling the strain to pull down their prices.

Richard Romer-Lee, managing director at Square Mile Investment Consulting and Research, admitted advisers have to be sensitive to the cost of everything they do for their clients, but said he could not see much evidence of cost pressure from consumers at the moment.

“Consumers value the service they get from advisers, and some of that is hard to put a number on,” he said, questioning how, for example, you put a number on tax efficiency, or the level of trust in the client-adviser relationship.

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“You just have to look at how complex the tax structure is for example, and it is clear consumers need help, so the demand for advice persists.”

A market study from the Financial Conduct Authority, which examined the competiveness of the asset management industry, is expected to place more pricing pressure on fund groups.

Meanwhile, increasing cost and regulatory pressure on firms following the Retail Distribution Review is said to have prompted the raft of independent advisers switching to restricted status, in a bid to lower the cost of researching the whole market for clients.

But Mr Romer-Lee said most of the advisers he speaks to do not feel pressure to lower their fees, adding however: “That is not to say it won’t come.” 

He argued there is margin pressure on firms, due to macro events such as increased regulatory controls, and said if there is continued period of low returns then advisers might be pressured by clients to lower their prices.

Square Mile launched in 2013 to work with financial services firms to sell research into the market to help advisers make informed investment recommendations.

The most recent additions to its client list include: Premier Wealth Management, Tarvos Wealth, Watterson Financial Planning, Ernest Grant and Arrow Financial Services.

Alex Reynolds, independent financial adviser at Advies Private Clients, agreed that advisers are not being pressured to lower their fees per se.

"I think perhaps some firms are being challenged where their fees are higher than others and market pressures are pushing these lower." 

Mr Reynolds said it is not just the fee that should be judged, but what service is being offered, adding: "Looking at some firms, there is a big difference between what some firms offer for the same fees.

"Ultimately advisers have costs to pay and must turn a profit so they have a duty to their existing clients to charge reasonable fees that ensures they stay in business.

"If there are increases in costs due to regulatory controls then this costs would be passed on to clients, so fees could indeed increase in the near future."