Opinion  

Should there be more transparency around advice fees?

Chloe Cheung

Chloe Cheung

We often hear about the importance of referrals in the advice industry, such as existing clients recommending their adviser to friends and family.

Indeed, a study previously found that most participants sought their adviser through a personal recommendation or social interaction, according to research for the Financial Conduct Authority’s evaluation of its work on the advice market.

Participants in the study were not very price-conscious, the report said, and they expressed some reservations about basing their decision on fees alone. “There was a sense that all advisers pretty much charged the same, and that the price was worth paying for someone with a proven track record they could trust,” it continued.

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But for people who do not have someone to go to for a personal recommendation, or would prefer not to ask their social circle whether they have an adviser, chances are their next port of call would be online.

And a convenience of browsing online in general, whether it be for a financial product or consumer good, is that it makes relatively easy work of comparing how much things cost.

Shopping around in the dark

When it comes to searching for advice online, although there is often emphasis on an initial consultation being free, there is much less information about how much advice costs after.

In a Google search for financial advice in my county for example, only two websites out of 10 published information about how much advice costs.

Back in 2013, at the start of the post-Retail Distribution Review era, the then-known Financial Services Authority stated in an old consumer leaflet that “your financial adviser now has to be clear about the cost of advice”.

Of course, this doesn’t necessarily translate to ‘your financial adviser now has to publish the cost of their advice on their website’.

And given that clients’ circumstances can be complicated and vary so widely from one another, perhaps in some cases it would be fruitless to attempt giving indicative figures.

Within the building trade, for example, customers do not expect to know how much it would cost to, say, fit a new kitchen or bathroom without the tradesperson examining the room and considering the amount of work that needs to be done, before being given a personalised quote.

‘Price on application’

On the other hand, not giving any information about fees essentially reads as ‘price on application’ – a phrase often associated with high-end luxury goods, or large detached houses with considerable curb appeal.

In fact, National Trading Standards recently deemed price on application in property listings as unlawful.

“The property’s price is information that the average consumer needs in order to make an informed transactional decision, such as to make enquiries about the property, conduct further research or arrange a viewing,” the National Trading Standards' estate and letting agency team said.

Similar arguments could be made about the price of financial advice. But the snapshot search for advice in my local area showed there was rarely information about how fees were charged, let alone figures.