Nearly half of advisers believe that some clients are overpaying for the value of advice they receive, findings from the New Model Business Academy (NMBA) suggest.
Amongst NMBA members who felt that some clients are being overcharged by their advisers, the main concerns were around high fees for initial and ongoing service; overcharging wealthier clients and charging for outsourced work.
Tom Hegarty, managing director of the NMBA, said: “The regulator has never provided specific terms around adviser charging, which may explain why there is such a wide range of charging structures in our profession.
“Alternatively, an hourly rate is sometimes deemed as more appropriate, but, unsurprisingly, these costs vary greatly across the sector – depending on advisers’ locations, overheads, regulatory costs etc. Indeed, many advisers feel they don’t charge enough for the time and service they provide.
“The discrepancy across the industry does, of course, make it difficult for customers to judge whether they are paying suitable charges for the value of advice they receive. However, despite the varied offerings, what was agreed across our member base was the value of the adviser-client relationship, where trust and personal service are seen as paramount.”
As many as 53% of those surveyed however did not believe that clients are overpaying and that many charging structures do not reflect the amount of work involved in providing a bespoke service proposition which satisfies regulatory requirements.
Hegarty added: “While ‘fairness’ is a subjective term, the principles of Treating Customers Fairly must apply across all clients, while also ensuring that advice businesses can remain profitable. To avoid any further industry ‘finger-pointing’, we recommend that all charging structures should be designed with the customers’ interests at its heart and that measures are put in place to minimise any potential conflicts of interest.
“Our industry provides a valuable service and it’s time to ensure that the strength of our relationships with our clients and the advice we provide are value for money, for both the client and adviser.”