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Clients would leave adviser over value for money concerns

Clients would leave adviser over value for money concerns

Three quarters of investors would switch adviser if they felt they weren’t receiving value for money, with 16 per cent already having done so, according to research.

A report from AFH Wealth Management, published yesterday (August 29), showed out of 1,026 investors surveyed, who had £100,000 in savings, only 7 per cent were loyal to their current adviser and a mere 5 per cent believed it was too much hassle to switch.

Nearly a fifth (16 per cent) said they did not trust advisers while 12 per cent said they were more proactive in their financial decision-making because they found their adviser untrustworthy.

Despite this a third (32 per cent) of investors recognised the value of financial advice.

Most investors tend to have greater confidence in advisers who are familiar with their financial situation, but 37 per cent based their level of confidence on previous performance and 36 per cent on good communication.

Alan Hudson, chief executive of AFH Wealth Management, said: “In order to demonstrate the value of proper advice, it is crucial that advisers understand exactly what investors want. Top of this list is honesty, be it about fees, charges or investment performance.

“As investors become increasingly discerning with a greater propensity to switch and new advice models enter the market, the value and effectiveness of face-to-face advice will continue to be challenged. 

“We, as an industry, must demonstrate value and give investors confidence in the actions we take and decisions we make.”

AFH Wealth Management also found only a third of investors understood what an investment platform was and 9 per cent of advised clients didn't know what a platform was at all.

Furthermore, two fifths (41 per cent) of investors didn't know the impact of platform fees on their investments. Of these, a majority (67 per cent) claimed to have an awareness of platform fees but did not know how they impacted their investments. 

Nearly a quarter (23 per cent) of people with savings or investments of more than £750,000 were not aware of how platform fees could affect their investment returns.

The majority (61 per cent) believed it was an adviser’s role to ensure that investors were aware of all the fees that they pay.

This compared to 35 per cent who said that platform providers should be clear and transparent on their charging.

AFH also surveyed 221 advisers and found 70 per cent agreed there needed to be more transparency around costs but a quarter (26 per cent) said they have always felt uncomfortable when discussing fees.

Holly Mackay, founder and chief executive officer of Boring Money, said: “Cost is, of course, an important component of net performance. 

“Underpinning a portfolio valuation is a shopping list of fees and charges, which are shared out to a substantial support crew of investment managers and administrators. And we know that investors remain broadly unable to articulate or calculate what these charges are.'

She added: “Advice is valued but we continue to take for granted that people understand what it is. It is only once we can better articulate the benefits, and be very upfront about what the charges are, that we can expect our customers to decide if that represents value or not.”