Investments 

FCA questions if investment advice is value for money

FCA questions if investment advice is value for money

Consumers accessing retail investments through financial advice might not be getting value for money, the Financial Conduct Authority has said.

Together with its business plan and mission statement, the regulator has today (18 April) published a series of "sector views" on the financial services sector.

It has said that in retail investments relatively few advisers are transparent about their pricing before they sell advice, adding: "This does not incentivise advisers to compete on price and may result in limited pressure on them to reduce their charges."

This comes as the regulator revealed its plan to increase adviser fees by 4.7 per cent. 

The document, published today (18 April), said that some firms might not be providing suitable investment advice consistently.

According to the FCA, this might be because of conflicts of interest or insufficient competence.

The financial watchdog warned about "limited comparability and ineffective disclosure" for self-directed investors.

The FCA has also pointed out that for protection intermediaries commission is still a "common element" of remuneration which could provide an incentive for mis-selling.

It said it has seen evidence of poor oversight of the activities of appointed representatives.

Alan Steel, director of West Lothian-based Alan Steel Asset Management, said the FCA's statement about advisers providing value for money "beggars belief".

He pointed out that advisers must spell out all charges to potential clients before any business is transacted. 

Mr Steel criticised the regulator's comments, adding: "Now if the FCA got off its pontificating a*** and actually visited the IFA businesses they suspect of breaking their rules and then shut them down we might get somewhere."

Matthew Harris, IFA and owner of Dalbeath Financial Planning, said: "In the real world, it can be quite difficult to know what fee will be payable until a full assessment of the case has been carried out."

He said financial advice fees work in a similar way to other professional services.

"Try phoning up a solicitor and asking them what their fee for legal advice on a divorce is, or phoning an architect and asking them what their fee for designing a house is; the answer in both cases will be 'it depends on how complicated the case is, so I will confirm this once I have more information'.

"Financial advisers are not selling cars, or cheeseburgers - each case is different." 

However, Mr Harris said he completely agreed that once further information is gathered then a full fee agreement or illustration should be provided to the client for them to approve before going any further.

"It is never right for an IFA to complete a service without getting specific approval of all the fees in advance."

damian.fantato@ft.com & katherine.denham@ft.com 

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