People fighting a continuing and increasingly desperate rearguard action against the FSA’s RDR proposals are still championing the cause of remuneration for advisers by means of commission, rather than the proposed switch to what the FSA calls “adviser charging” and what the rearguardistas call “fees.”
To this end, they keep on commissioning market research studies supposedly proving that consumers won’t pay these “fees,” so the whole thing will be a complete disaster for all concerned.
Honestly, I have never seen anything stupider, more transparently manipulative and boring than the findings from these studies. I haven’t actually seen the questionnaires that any of them have developed, but I suspect that if I was designing anti-“fee” research I’d come up with something like this:
1. Would you like to start paying large fees in order to get financial advice that is currently available free of charge? YES/NO
2. If you had to pay fees, how much would you like to pay? (SELECT ONE)
Less than £25 per hour
£25-£100 per hour
More than £100 per hour
That should do it – we’ll have clear evidence that 93% of clients don’t want to pay fees, and that if they were obliged to do so then 96% would want to pay £25 per hour or less.
You just can’t read anything more boring than coverage of research studies like these. They tell us nothing about anything, except perhaps the not-so-hidden agendas of the people commissioning them. And they’re useless and misleading not just because they’re so crudely manipulative, but also because they don’t actually make clear what’s likely to happen under RDR at all.
For one thing, most clients most of the time won’t actually pay anything that looks like a fee, in the sense of writing out a cheque and seeing an amount debited to their current accounts. Advisers managing clients’ portfolios on platforms will take their charges relatively painlessly from clients’ platform cash accounts, selling down investments if necessary to do so. And even when there isn’t a nice handy cash account, the FSA has made it clear that they will allow advisers to receive their remuneration from product providers, not directly from clients.
And for another thing, even if advisers may quote a nominal hourly rate for their services (and even if it’s a great deal more than £25 an hour), the invoice clients receive will not be based on the principle of time-based charging. As far as remuneration for ongoing service is concerned, it’s much more likely to be calculated as a percentage of the value of the portfolio – an approach which, actually, when you come to think about it, looks a lot like, well, commission actually.
There are other points I could make, but I’m not going to. These stupid research stories that I keep on reading tell us precisely nothing about what’s actually going to happen in the financial advice market post-RDR, and when this becomes apparent – as it will – the people responsible for them will have some explaining to do. I have no intention of providing them with a ready-made and full explanation just so they can keep it on file until needed.