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Pensions Advice: You Don’t Get What You Pay For

31 July 2015  |  2163 views  |  1

According to a Platforum survey around half of investors expect to pay less than £500 for retirement planning advice. In fact, their survey of 252 active investors, found little appetite to pay for advice at all.

The Retail Distribution replaced in-built product commissions with adviser fees, however these fees are now bringing the quality of service into sharper focus, especially as the fees being quoted from advisers vary widely – from £250 to £5000 plus. Many advisers are being accused of ‘hiking up’ fees to protect themselves against claims to the Financial Ombudsman Service or to price themselves out of certain customer segments completely. 

Whatever the fee being charged, there’s clearly a lack of appetite to pay fees, and this illustrates the difficulty the industry is having in demonstrating the value of financial advice. But while the general population remain unconvinced about paying fees, I suspect even the existing customers of many financial advisers may be assigning a lower value to the advice they receive and this is something that needs to be quickly addressed.

The advice that customers receive may well be spot on and there’s little doubt that sound financial advice can add significant value. However, the quality of the product information that customers receive from providers and advisers to help explain this advice is generally way below what people expect these days. If you’re shopping for an expensive pair of trainers, a smartphone or even a vacuum cleaner you’ll get access to an array of product information to support the purchase – videos, interactive 3D imagery etc. Yet when you want to invest a decent chunk of your life savings into a pension, the quality of product information is pretty poor in comparison to the other purchases that we make in our lives. Customers receive static fund factsheets and financial reports that look like they were designed 15 years ago (which they probably were), and this is cheapening the whole experience in the eyes of the customer. 

If advisers want investors to pay a fee and be satisfied that this represents value for money, they need to start giving customers an end product - probably digital - that's professional, slick and easy to understand. When that happens we may find the perception of value starts to change. But if they continue to stick with the bog standard, paper-led, uninspiring means of delivering information, then £500 will always sound expensive.

 

TagsRisk & regulationRetail banking

Comments: (1)

Melvin Haskins
Melvin Haskins - Haston International Limited - | 03 August, 2015, 07:13

An excellent analysis. No pension provider provides advice - all advisors were outsourced many years ago to enable the pension companies to avoid taking the blame for poor performance.

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