Advisers see clients question fees amid inflation pressure

A survey by Panacea Adviser, with responses from 234 advisers, revealed that 28 per cent were unsure if their clients were less willing or unable to pay fees, while a further 28 per cent said they did not think clients were less willing or unable to pay.

As part of the responses, one adviser said: “More and more are asking probing and often quite rude questions, but usually those are ones who have not been clients long or the ones which have not bought into the process or clients that are new.”

Another adviser said: “Fees have never been an issue with our clients, but we have noticed a reluctance to part with cash in expectation of having to draw on it either for themselves or to help family members out." 

The survey found that nearly half of advisers (43 per cent) have seen increasing energy costs have a significant impact on their business, while 23 per cent stated seeing some impact and 34 per cent saw very little to none. 

Many of the 34 per cent that stated very little, or no impact also commented that they work from home or had a fixed rate but had concerns about this changing.

However, the 43 per cent that commented on significant impacts said the increase in outgoings but fees staying the same has reflected on the reduced profits. 

Additionally, Panacea said there was also a reluctance to recruit and to reduce face to face appointments due to rising fuel costs.

It does not help having to carry a greater reserve and it causes sleepless nights due to the randomness of a very high potential hit against the firm which is unpredictable. Anonymous adviser

One adviser said: “Over 500 per cent increase in our electricity costs have been quoted.....and that is the lowest cost available to us”.

Another said “As with all businesses the rising costs, not just energy, but also compliance and FCA fees are giving rise to some major concerns.” 

In addition to this, the survey asked advisers about the impact of the Financial Services Compensation Scheme levy on businesses and their cash flow. 

Some 88 per cent of advisers said the FSCS had a huge or significant impact on their business, with only 4 per cent stating it had some impact.

Yet an FSCS spokesperson said there are a number of reasons for the financial harm that feeds into the compensation the FSCS pays, saying it was “conscious of how high compensation costs impact levy payers”.

“We are looking to support the industry by providing insights and an independent view on issues driving compensation costs,” it said. 

“We also now publish our first forecast for the following financial year levy in November to help firms prepare, and currently we expect the 2023/24 levy to be around 20 per cent lower than this year.”

Most adviser comments focused on the uncertainty of future costs, which often have to be passed onto clients with increased fees.  

One comment, which Panacea said was typical of the majority, stated: “Stress and sleepless nights from [a] governing body who just wants to kick us in these difficult times. I honestly couldn’t remember the last time the FCA helped advisers.”

“Ridiculously high cost is threatening my business,” one said. “If the FCA did its job correctly the payments from the FSCS would be dramatically reduced saving firms a small fortune”.

Another said: “It does not help having to carry a greater reserve and it causes sleepless nights due to the randomness of a very high potential hit against the firm which is unpredictable. 

“It means that we have to spend more on IT and compliance to try and mitigate.”

Box-ticking exercise

Elsewhere in the survey, 96 per cent of advisers said their firm pays all its regulatory fees on time, with only 1 per cent saying they did not.

Some of those that said they did not pay on time commented that they have had to take loans to cover the fees. 

Advisers also said they believe that the FCA fee consultations are a box ticking exercise (79 per cent), with no advisers believing it to be a genuine exercise. 

Panacea Advisers said this is “very worrying”, with not one single respondent thinking consultations were a genuine attempt at seeking out opinions and views that would be listened to.

 As a small DA firm we try to keep our own morale up, but external factors outside of our control impact upon it. Anonymous adviser

One adviser said: “Whilst it would be nice to think we complete these things on a regular basis for a purpose because of the way we keep our accounts and deal with our income, the results the FCA get from us are almost meaningless unless they look over an entire year which I am fairly certain they do not”. 

Another adviser said: “For most FCA consultations they have already made up their minds before consultation even takes place”.

Speaking to FTAdviser, an FCA spokesperson said: “We take all feedback we receive into account, for example the annual survey undertaken by our practitioner panels. We recognise that to meet our objectives we impose a burden on firms. 

“We seek to ensure that it is proportionate – with the benefits outweighing the cost. We welcome responses to our consultation, which we consider carefully before taking our decisions.”

How is company morale?

Overall, the survey revealed that 36 per cent of respondents said their company morale was negative or very negative.

One adviser said: “Everyone, employees and directors are faced with the same economic environment and factors.  

“Security of business and personal finances are lower as a result. Business and employment uncertainty are high."

Another added: “As a small DA firm we try to keep our own morale up, but external factors outside of our control impact upon it.  

“As well as providing advice, we are now expected to be life coaches and counsellors and able to identify any potential vulnerability a client may have.”

sonia.rach@ft.com 

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