Regulator Fails Again on Fee Transparency

Regulator Fails Again on Fee Transparency.

A round of applause for the regulator!

The Financial Conduct Authority, the industry regulator, after deliberation regarding European rules under the Markets In Financial Instruments Directive II (Mifid II) has decided not to standardise how financial advisers display their fees to consumers. This also means that discretionary fund management firms will not have to standardise their charges either.

The rules that are due to come into effect in January 2017 require all firms to offer consumers a breakdown of their fees, but there is no requirement in how this is specified.

For too long now financial companies have been allowed to hide behind percentages. As many of you will know we have always quoted fixed fees in real monetary terms to enable you to decide whether our financial advice services are good value for money.

A financial adviser quoting you a fee of 2% or 3% upfront plus an ongoing service fee of say 0.5% per annum, is in our opinion opaque and not transparent.

Yet again, this leaves the door wide open for pensions, investment, mortgage and banking groups to mask the truth about exactly what you are paying for a particular service. Financial companies who still charge in percentages without giving you a real breakdown in round pound numbers is still selling services on a commission basis in all but name.

Various bodies have suggested that standardising how charges are would hinder innovation, we totally disagree. The regulator has yet again failed when it comes to financial adviser transparency and as far as we're concerned, given that they have a statutory requirement to protect consumers, we believe they are breaking the law.

Shop around

Our advice is simple if any financial company quotes you percentages and does not give you what the real charges are in understandable numbers then you should walk away. We have always maintained why should an investor with £20,000 to invest pay double to an investor with £10,000 to invest given that the time and the work is virtually identical.