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For months I’ve been trying to write something for Adviser Lounge, but there was nothing worth getting worked up about. Until now. It’s twenty-four hours since being on Radio 4’s MoneyBox programme and I’m in a high dudgeon. The target of my ire is the idea that all financial advisers should publish fees on their websites.
Before I go any further let me be very clear; I have no ‘beef’ with anyone mentioned, we’re all seeking better outcomes for clients and a better reputation for financial services, but we have a difference of opinion about how this is best achieved.
Paul Lewis (the MoneyBox presenter) wants advisers to fully disclose fees (which we’re required to do) but he wants public disclosure of fees to allow consumers to compare charges. I’m not convinced it’s that simple.
I knew Paul would try and “put me on the ropes” because I’d gently upbraided him on a panel session several months before saying he was “the pot calling the kettle black”. I’d been on his website (and the websites of several other journalists) but couldn’t see how much he would charge me for writing some ‘words’. Cheers for me and jeers for Paul from a room full of financial advisers.
Now I would be on Paul’s turf and though I didn’t think he was trying to ‘stitch me up’ he wasn’t going to go easy either.
Just before going on air I thought about asking Paul for a blind fold and a cigarette before he and his army took aim at me. In the studio he was joined by Lesley James, co-owner of Simplified Money, a firm that does disclose fees on their website. Paul also referred to a recent study about upfront fee disclosure, by Phil Bray’s Yardstick Agency. And there was a statement from Keith Richards of the Personal Finance Society suggesting that upfront fee disclosure would restore trust in financial services.
In a recent article Keith stated that “advisers’ reluctance to provide guidance on the fees they charge is a ‘barrier’ to the growth of the industry”. Really? Where’s the proof? Because it’s not in the study by the Yardstick Agency. Aside from the early admission that there is no regulatory requirement for advisers to disclose fees on their website, the only real facts that I could see from that study is that a lot of adviser websites don’t disclose fees. On sites where they do disclose fees they are among the least viewed pages. But the sample set was so small that drawing any meaningful conclusions is probably just guesswork with a bit of bias thrown in.
As a basis for a campaign to get advisers to disclose charges on websites it’s weak and I remain unconvinced. Back to Keith Richards and the Personal Finance Society; this is the organisation that doesn’t have the cojones to run its events without provider sponsorship – talk about transparency and trust. To lecture advisers about charging and disclosure is hypocritical. Get your own house in order before pointing the finger at us because we no longer take the provider’s shilling when providing our services. There, I’ve finally got that off my chest.
The argument for disclosing fees on an adviser’s website is that it would promote greater trust. Possibly, but I reckon fewer headlines along the lines of “The next big mis-selling scandal” (The Times 22nd June) or “British Steel pension scheme members ‘preyed on’ by financial firms” (Guardian, 16th December) would probably have greater impact. I don’t see how disclosing fees on a website would have prevented the British Steel Pension Scheme debacle.
The problem with fee disclosure is that it is simply a price list – which has the potential to become a race to the bottom. It’s relatively easy to price things that can be commoditised, but I’d argue that advice doesn’t fit easily that model. Price alone is a blunt discriminator, how do you measure and publish value? Until there is a simple and comparable ‘value index’ how do consumers determine the amount of value they for each unit of cost?
There are many other variables that make price disclosure and comparison difficult including competence, convenience, location, service levels, and the list goes on.
It could be that some element of fee disclosure on a website is a good thing. But if I thought that this was the most effective thing I could do I think I would have done it already?
I spent the last three months analysing my business with an external business consultant. We looked at the firm’s leadership, operations, finances, marketing, and organisation and I’ve gone through the subsequent action plan with a fine-toothed comb, but I cannot find the bit that says my biggest weakness and highest priority is disclosing fees on my website.
I’ll close with this tweet from Brian Hill following the programme – I wish I’d said this on the day!
“Client thinks they need to consolidate 5 pensions and looks for fees on that. Turns out she should only consolidate 2 of them, has a looming CGT issue, inadvertently caused an IHT issue, paying into useless insurance and has off the scale risk in portfolio. How do you price that [on your website before clients come in]?”