Perceived Value of Financial Advice

This is a ‘made up’ conversation on the costs of financial advice.  It is ‘tongue in cheek’ but we hope it helps with your perception and views on the costs of financial advice as well as what goes on behind the scenes to get your completed advice ‘on the table’.  Our fees are actually much cheaper than those mentioned below but we hope you get the idea.

Instant Fees: Our Fees

A consumer asks a financial adviser how much it would cost to advise on and set up a pension transfer worth £200,000.

Financial adviser:  My fee for that is £4,000.

Consumer: That seems really high.

Financial adviser: What do you think is a reasonable price for this work?

Consumer: £2,500 maximum.

Financial adviser: Ok, you can always DIY, you know: do it yourself.

Consumer: But I don't know how to.

Financial adviser: Okay then, how about I teach you how to do it yourself

for £2,500.  In addition to you saving £1,500 off my fee, you will learn

valuable knowledge and skills that will benefit you and your financial future.

Consumer: That sounds great, thank you.  Let’s go for that.

Financial adviser: Brilliant.  To get started, you are going to need some tools and permissions.

You will need to:

• Order Advanced Pension Examination study materials and book in for the examination with the Chartered Insurance Institute, pass the exam and then become a fully paid member of the institute.  You then need to carry on studying for an additional 50 hours Pension Transfer CPD (continuous professional development) this year.  At least it is not the whole 200 hours CPD that you need to do, just the 50.
• Deposit at least £20,000 in a bank account for regulatory capital adequacy requirements that you cannot touch or use, it must stay in tact.
• Apply to the FCA and pay for authorisation to become a regulated adviser.
• Set funds aside to pay for FCA fees, Financial Ombudsman levies and Financial Services Compensation Scheme levies.
• Secure professional indemnity insurance, this cannot just be for the month that you ‘DIY’ your pension transfer.  You also need to buy ‘run off’ cover for when you stop being a financial adviser after the job is done just in case you get sued by your partner in 20 or 30 years time as he/she may sue you if your pension does not deliver what you said it would for both you and your partner or you miss something.
• Set up FCA Compliance Procedures, Treating Customers Fairly Procedures, Ethical/Socially Responsible Investment Procedures, Vulnerable Client Procedures, Anti-Money Laundering and Identity Procedures.
• Set up contingency plans for if you cannot work at your premises or you have to lock down and work somewhere else.
• Set up security features to protect your data/information and also pay to register under General Data Protection Regulations with the Information Commissioner.
• Write to every pension company in the UK to establish an agency with them so that they will accept your pension if you choose to invest with them.
• Buy in a telephone system with cheap calls as you may have to hang on for an average of 2 hours to get through to each pension company to order comparison quotes or register for online quotes.
• Buy in product and charges research and comparison software.
• Buy in fund performance ratings and past performance comparison software.
• Find a friend (who already has all of the above set up and is qualified) to act as your locum if you fall ill and are unable to complete your own pension transfer advice.

Consumer: But I don't have any of those qualifications, authorisations or

tools and I cannot justify buying all of these for just one pension transfer.

Financial adviser: Okay.  Well then for an additional £500 I can ‘vet’ you and register

you as an appointed representative of my firm to ‘rent’ my authorisation,

insurance and research tools to use for this pension.

Consumer: Okay.  That’s fair.

Financial adviser: That’s settles it then.  We will start on Monday at 8am.

Consumer: But I work Monday to Friday.

The only free time I have available is in the evenings and at weekends.

Financial adviser: If you want to learn from me then you will need to work when I work.

This project will take you at least 150 hours studying to pass just this one exam alone,

so you will need to take around 20 days off work.   At least you do not have to study

and pass the other 15 or 20 examinations to become a Chartered Financial Planner.

Consumer: That means I’m going to have to sacrifice my pay

for 3 weeks or use up most of my annual leave.

Financial adviser: That’s true.  Remember, when you do a job yourself

you need to account for all unproductive factors.

Consumer: What do you mean by that?

Financial adviser: Doing a job completely from start to finish includes time spent to plan

the project, research, travel time, power, written reports and application for the pension

amongst other things.  So that’s where we will start on Monday.  I will need you to meet

me at the office at 7am to ‘fire up’ systems, complete security checks and ensure all is

ready for us to start your education and research process at 8am.

Consumer: At 7am?  My work day doesn’t usually start until 9am.

Financial adviser: Well actually, you’re in luck.  My plan is to open up at 7am anyway

for normal, daily business as I have a few things to do but I will still need you to

be there by 8am so that we can ‘crack on’ with your work promptly.

Consumer: You know, I’m starting to realise that a lot more goes in to deliver

financial advice behind the scenes than what I usually see i.e.  just a finished

advice report and application form.  I now realise your fee quote for £4,000

is very reasonable.   I would like you to give me pension transfer advice.

What did we learn?

When you pay for any job, especially a heavily regulated and highly emotive job such as advice on your personal wealth, tax and finances, you don’t just pay for the time taken in advising you and getting works completed.  You also pay for:

• Knowledge
• Experience
• Custom skills
• Tools
• Planning and preparation
• Professionalism
• Work ethic
• Excellence
• Discipline
• Commitment
• Integrity
• Taxes
• Licenses
• Sacrifices
• Liabilities
• Insurance

There is competition out there though, so if your financial adviser’s fee quote exceeds your budget there is nothing wrong with you shopping around.

Just remember ...  you get what you pay for and whilst financial advice is neither cheap, quick or easy, it takes time to get financial planning and tax advice right for you.

Caveat: "The idea for this story was ‘borrowed’ from a friend’s social media page and adapted for the financial advice and services industry.  Food for thought I hope."  Ashley Roberts-Clark, Director.