Since 2012 it should be far easier and clearer for you to know exactly what you are paying for in terms of advice, both upfront and ongoing. Sadly, this is not always the case.
Wingate have long held a clear fee charging structure which does not include commission as we believe this is the fairest and clearest way to illustrate our charges.
Before the FSA’s Retail Distribution Review in 2012, clients normally paid for financial advice via commission paid by the product provider being recommended to the client. The accusation of “commission bias” was sometimes levelled at the industry and this needed tackling. Therefore, the regulator strove to “improve standards” in the distribution of financial services with the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR).
Things to consider
Different types of advice may have different charges depending on the complexities of the advice or the standard of the adviser you are working with. For example, giving advice related to numerous pension pots at retirement will be more time consuming and potentially costly than giving advice on setting up a single stocks and shares ISA.
In the same way, if a firm is independent or if the adviser is Chartered and holds more specialist qualifications, you may expect to pay more for their expertise when compared to companies who provide restricted advice or advisers with less qualifications, although this is not always the case.
Making broad stroke cost comparisons can be difficult and it does require you to dig a little deeper and speak to different advisers before making a final decision. You are potentially looking to make a long term commitment and therefore finding someone you are comfortable with and that provides the best service for you, is more important than simply finding the “cheapest”.
The advice market today
To help give an example, the Financial Conduct Authorities report: Evaluation of the impact of the Retail Distribution Review and the Financial Advice Market Review, December 2020, based on responses from over 311 different companies across the country, stated that the average charges for initial advice were 2.4% of the amount invested and ongoing advice of 0.8% per annum. When comparing these average figures to our current charging structure, I personally find these average charges quite high.
Trying to find the “cheapest” advice is not a great long term plan. In my experience when clients are looking to make long term financial decisions there are a range of other questions that should also be considered:
- The quality of the adviser and company you are talking to.
- Ensuring that the person you are talking understands your needs and objectives. Remember you are looking to build a long term working relationship.
- Have they given advice similar to what you are looking for before?
- Do they have client testimonies or examples of case studies you could consider?
Selecting a long term financial adviser who is going to help ensure you meet you long term hopes, and dreams is a very important exercise.
Remember that in many cases your retirement wealth or your total wealth may run into hundreds of thousands of pounds, this money has taken a lifetime to build, so why cut corners at this stage?
The service you receive should warrant the charges you are paying. This should be more than just “investment returns” and there should be focus on ensuring you meet your short, medium and long term objectives.
If you are unsure what your objectives are or if these have not been explored in enough detail, then consider revisiting the advice you have received.
If you would like to know more about our clean and transparent charging structure, please do not hesitate to contact us at Wingate.