The vast majority of advisers have reduced the total cost of investing for clients in recent years as the price war continues to put pressure on fees, new research has found.
The Lang Cat’s State of the Adviser Nation research showed 90 per cent of advice firms had cut their clients’ overall investment costs in recent years.
More than a third (36 per cent) of advisers had reduced their clients’ bills by opting for a cheaper investment product, while 20 per cent had cut platform costs.
The Lang Cat, which polled 404 adviser firms in October and November last year, found just 9 per cent had reduced costs by cutting their own fee while a further 10 per cent had actually increased the overall cost of investing.
The remaining 26 per cent reported their clients’ overall costs had come down organically due to price reductions out of the adviser's control.
The Lang Cat stated: "It’s a brave adviser that raises their costs in the current market environment, particularly as investment and platform charges fall.
“The advice community had responded in part positively to the relentless focus on value for money from the regulator. While platform costs are falling, it is clear that most firms believe investment management should take the hit, with more fat to go after.”
It went on to warn advice would soon be the single most expensive element of a client’s total cost of investing, adding new disclosure rules and disruptions would increase price pressure on adviser fees.
Just last month Chris Justham, head of London intermediary at Seven Investment Management, warned the fee race had 'only just begun' as cost issues were at the forefront of advisers’ minds.
The fees charged by investment managers, platforms and advisers have all experienced downward pressure of the past few years as the regulator has turned its beady eye on ensuring clients receive value for money.
But a hefty 40 per cent of advisers polled by the Lang Cat branded the Financial Conduct Authority’s drive for value for money as the biggest perceived threat to the advice profession, with a further 40 per cent marking it as some sort of threat to the industry.
The fee pressure has come at a time when increasing regulatory costs — specifically the compensation scheme levy — and a rise in the cost of professional indemnity insurance have been headwinds on adviser profits.
About 75 per cent of advisers marked such costs as a threat against the profession, the Lang Cat found.
Speaking at a breakfast briefing yesterday (February 27), Lang Cat principal Mark Polson said there was frustration from advice firms at what was perceived as a consistent bashing from the regulator.
He said smaller firms tended to seem “more cross” about the ongoing regulatory burden, adding that some small credit from the Financial Conduct Authority could go a long way towards improving sentiment in the industry.
imogen.tew@ft.com
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