A UK Chartered Financial Planner was on Twitter referring to ‘Tweet O’ the Week’, by another Chartered Financial Planner. The tweet said ‘ Why am I paying you to tell me to do nothing?’ The answer was ‘Because you wouldn’t have come to that conclusion without me!’
Sometimes, after a financial review, the recommendation given by a financial planner to a client is to do nothing. In other words, buying or selling an investment, moving a pension or switching a mortgage will not provide any benefit to an adviser’s client. In fact, when it comes to final salary pensions, the assumption has to be that it probably is in the best place already. However, ‘probably’ is not advice.
Advice requires time for analysis of the pension, before a recommendation is made. This advice has to be paid for and the answer may be that the initial assumption turns out to be the best for the client. That does mean that the client will be asked to pay an invoice, having been told to do nothing.
Advice may require a certain set of actions, but that does not mean that any products have to be bought. In the UK, RDR really did separate the advice from the product. No more is the professional adviser looking to sell a product to get paid or have a bias to a product that provides the most commission. The commission has gone. The bias has gone and if a product is the solution, such as an investment or pension, they the fees will be purely based on an agreement with the client and not on the product.
While RDR has not benefited expats that deal with many expat IFA firms that do not operate transparently, the wind of change is coming.
IDD is here this month and insurance products within the EU will have to show the investor all the charges in hard pounds, shillings and pence. This gives investors more opportunity to discuss fees with the adviser and the advisers will tend to move towards advice fees as they move more to a profession.
This article was published on 15th October 2018
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