Tracking down the best value financial advice can be tricky as many firms do not publish charges online
HOW easy is it to compare the cost of advice? Not very, it seems.
Of the largest 100 independent financial advisers (IFAs) in Britain, only 11 publish charges on their websites. The rest typically require a face-to-face meeting as they argue that costs depend on the complexity of an individual’s circumstances.
Critics say some people will feel pressure to invest at a meeting, and that they need more information in advance.
Of those advisers that do not publish advice fees online, some were more forthcoming than others when asked by The Sunday Times to provide indicative costs for a saver wanting to manage a £200,000 pension pot in retirement. For example, while Towry and Chase de Vere provided details about their range of fees, St James’s Place, Tilney Bestinvest and Heartwood declined.
Gina Miller of SCM Direct, a wealth manager that has campaigned for greater fee transparency, said: “It is a scandal that the financial regulator has not fined large firms for not clearly showing their charges on websites and in literature. It’s not that people do not want to pay for advice — they just want value for their money and to pay fair and transparent fees.”
Mark Polson at the Lang Cat, an investment analyst, said: “Good advisers will give indicative ranges of costs on their websites; I certainly wouldn’t approach an adviser who didn’t do this.”
Last week the Financial Conduct Authority launched an investigation into this area. It will consider how easily people have “access to the information, advice and guidance necessary to empower them to make effective decisions about their finances”.
Candid Financial Advice, a relatively small firm that does publish its fees online, analysed the websites of the largest 100 financial advisers. Of those, only six — Brewin Dolphin, Cumberland Place, Hargreaves Lansdown, Investec Wealth, Skerritts Consultants and Vestra Wealth — publish their initial and annual advice costs. Another five — Saunderson House, Epoch, David Williams, Clarity and HBFS — publish some fee details online.
The initial fee is the charge that applies when you first meet an adviser and recommendations are made about your circumstances. The annual charge is a fee that applies if you want your finances reassessed on an ongoing basis.
Separate analysis by the consumer group Which? found about half the IFAs “dodged” the question when asked for an indication of their charges over the phone.
Rules introduced in 2012 mean an adviser must agree fees upfront with clients before providing help. Some experts argue that indicative charges should be displayed on websites so people can make decisions without having to commit to meeting an adviser.
Richard Lloyd, the executive director of Which?, said: “We want all advisers to clearly display their charges for a range of scenarios . . . so it’s easier to shop around.”
Justin Modray at Candid Financial Advice said: “The current system leads to many customers paying through the nose for advice as they feel morally obliged to use an adviser after meeting them, despite exorbitant fees.”
How open are advisers on fees?
The Sunday Times was seeking to compare the cost of advice for someone wanting to review three pensions worth £200,000 in total, and aiming to draw some income while keeping the rest invested.
It is simple enough to get a rough idea of costs from advisers that publish their fees online. Brewin Dolphin has an initial charge of 2%, plus VAT, of the amount being managed; this works out at £4,800 in our example. The annual charge is 1% plus VAT, so another £2,400 a year.
Hargreaves Lansdown also charges 2% plus VAT as an initial fee, and then 0.5% plus VAT in each subsequent year, so £1,200. Candid Financial Advice charges 0.75% initially followed by 0.6% a year, so £1,500 and £1,200 respectively.
Epoch discloses an annual fee of up to 1.2% on its website but no details of its initial charge; this depends on circumstances, it said. When asked to provide an indicative cost for our scenario, it suggested £3,000 initially followed by an annual charge of £1,600 if the money is invested in its “discretionary” service, where decisions are made on your behalf.
What about those that do not advertise fees online?
Chase de Vere said the initial fee would be £250 an hour — plus £80 an hour for “administrative support” — or 3%, which in our scenario would be £6,000. An annual 1% charge or an hourly rate will also apply. The use of the hourly or the percentage fee “would be agreed in discussion with the client,” it said.
Towry would not say how much it would charge in our scenario, though an initial meeting is free. After this, it said, “each piece of work is individually costed and the client is provided with a tailored fee estimate, with nothing charged until the client has agreed the scope of work”.
It added: “Fees . . . range from £85 an hour for client services and administration to £200-£300 an hour for our advisers, depending on seniority and experience.”
Tilney Bestinvest said it could not provide indicative fees. “Every case is different depending on complexity of the clients’ circumstances,” it explained, “so we always provide an individual cost assessment based on the work involved.”
Heartwood said it was “unable to comment” on the fees request. St James’s Place said The Sunday Times was “not asking the right questions”.
Where to go for free guidance
You cannot get advice free, but you can get guidance — a crucial difference. The former is regulated, meaning you can seek redress from the Financial Ombudsman Service if you feel you were given the wrong advice.
You can receive free guidance from the government’s Money Advice Service (moneyadviceservice.org.uk), while the Pensions Advisory Service (pensionsadvisoryservice.org.uk) can also help.
If you are aged 50 or over, you can book a free appointment with Pension Wise (pensionwise.gov.uk, 0300 330 1001).
Should advisers publish their fees online or is a meeting necessary? Are you paying too much for advice? Email us at firstname.lastname@example.org