The Financial Conduct Authority (FCA) has been reviewing why consumers may not seek advice when needing help with their investment options and why many are surprised by how much advice can cost and also the huge deviation in those costs.
In their evaluation published on Thursday 3rd December valuing the impact of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR), the FCA found that ongoing advice services with a 1% annual adviser charge did not have any different features to advisers charging 0.5%.
Advisers charging 3% for one-off advice, the FCA also found there to be no noticeable differences to advisers charging 2% or less.
In their research, the average adviser charge for initial advice was 2.4% of the amount invested and 0.8% a year for ongoing advice. The charge did not include underlying product and portfolio charges, like custody and fund management charges.
The FCA said: “more than 90% of new customers where firms offer both one-off and ongoing services were placed in ongoing advice arrangements”. Most firms told the FCA this was the customers decision and other firms said: “typical consumers needed ongoing assistance for changes in personal circumstances and the financial markets".
The FCA is concerned that new customers are placed in ongoing advice arrangements and have suggested this is a default option and not one justified by the circumstances of the consumer.
We could not agree more. There are too many financial advisory firms that charge ongoing advice %s and do nothing all year or for some very little save a review once a year. There is no real ongoing service just an excuse to charge say 0.75% to 1.0% pa.
That is why we charge transparent fixed fees (see Fees & Quotes) based upon hourly rates, complexity of works and ongoing liability rather than a flat rate 2-3% upfront. In addition, our ongoing Mortgage MOT Advice Services are based upon the number of schemes you have and the frequency of advice reviews compared for set fees compared to % of value of investments each year.
We are clear, fair and not mis-leading and always will be.