Today’s offering, from Legal & General, proclaims “Investors threaten to turn away from IFAs”.
The background survey of 2,030 adults by YouGov found that 64% of investors said they would stop using their IFA if they begin charging an hourly rate.
While there is no doubt this information is potentially alarming for advisers, for that reason alone it is unhelpful.
Why was the research commissioned in the first place? With the implementation of RDR only weeks away, the change to a fee-based model for financial advice is a foregone conclusion and thus makes the point moot.
At an Adviser Intelligence seminar earlier this week, put together by Aberdeen but with a spokespeople from a variety of companies, the central topic was “Developing a Valuable Client Centric Proposition” and speakers approached the subject from a number of different angles and in a constructive way.
Constructive costs conversation
Rather than scare the adviser audience about the changes that lie ahead and flay them into action, spokespeople for Defaqto, Investment Quorum and Rayner Spencer Mills presented accessible and useful information within the framework of what is expected by the regulator post RDR.
Each one of them discussed pricing, but none of them said the adviser community should be worried about introducing their new models to investors.
David Cartright, head of insight, Defaqto, said: “You are all faced with a big change, particularly those who have not operated with fees before. We have only just started to see announcements from providers on what advisers will be charged, so you need to start working out how that fits. Can those products fit with your approach and the way your clients want to pay for them?
“While you might say you’re ready, you have got to see fund providers and platform providers and find out if they are in the same place.”
He said there were still questions to be answered surrounding clean fee share classes and what happens if you hold the old share classes for old money and the clean fee share classes for new money.
Must be adviser led
The onus is on advisers to get their head around this and work out how to get their pricing models right. But the most important factor is to start telling clients how their business is changing, why they are changing and what value their service represents.
Discussions about fees should be explicit and come from the horse’s mouth, rather than be prompted by the client after they have received communication from the FSA on RDR and its implications.
This is why L&G’s survey is particularly irritating, because it is the adviser’s role to explain to their clients what is ahead and to illustrate the reasons the investor should stick with them.
Some investors will inevitably decide to turn on their heels, but since everybody will be offering advice on a fee basis there will be no commission-based alternatives to be found.
This may well lead to competition among IFAs to offer a more competitive service, but as with other professions (and let’s not forget RDR is designed to give financial advice a professional status) there will always be people willing to pay for quality.
Advisers should be spending time trying to work out how to make their businesses stand out from the rest, not shirking out of necessary conversations because they are scared they will lose all their clients.
Scaremongering does nothing to help this progression.
Have you had the “fee conversation” with your existing clients? Let us know how it went in the comments box below…
