There's unlikely ever to be a law banning percentage-based financial advice fees, but if the Financial Planning Industry were serious about becoming a profession and being fair, it would head that way. In my view, one of the big rackets in the financial advice industry, hiding in plain sight, is percentage fees. ![]() It is up there with other advice distorting practices like commissions, fee-sharing arrangements and other sales incentives paid by large institutions and product providers. While the Association of Financial Advisers, The Financial Planning Association and all "dealer groups" having already moved to "fee for service", the problem is that this almost always involves taking a percentage of each client's' money (referred to as "funds under advice", or FUA) directly instead of being paid out by the product manufacturers as sales commissions. Exactly the same result for the client, just called something different. There are four problems with this system:
wetalkmoney do not charge a percentage of FUA because we don’t think it’s fair. A person with 10 million dollars is not costing us 10 times as much to look after as someone with one million. Fees should depend on your particular needs and the advice and service you require. By charging each client a dollar amount like a doctor, accountant or lawyer, rather than a percentage, there is simply no question in whose best interests we are acting. And because we do not accept commissions and other sales incentives, we access ‘naked’ pricing. This is the true wholesale cost of a product, which is minus the sales commissions, marketing allowances, fee sharing arrangements and other sales incentives that inflate prices. Is there likely ever to be a law banning percentage-based financial advice fees? Probably not. But if the industry was serious about lifting standards and restoring consumer confidence, then that is the way it would be. Whenever you're ready....here are a couple of ways I can help you get on track to a stress-free retirement. 1. Follow us on Facebook and Twitter and sign up to our regular emails updates. They are great places for great ideas. 2. Work directly with me. If you’d like to work with me and my team to move from stressed and frustrated to relaxed and on track, you can schedule a phone call here. You’ll find out how we can help and if we are the right fit for you. 20 minutes, no obligation. IMPORTANT This information is of a general nature only and may not be relevant to your particular circumstances. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. See full Terms and Conditions here.
John
25/1/2016 11:53:53 am
Tony, my adviser charges a combination of flat fee and %. I figured that the adviser should have an incentive to grow my portfolio. What are your thoughts?
Reply
John
2/3/2016 06:44:07 pm
It's a fair point John. My view is that your adviser still is rewarded for events that are outside his or her control and there is still a natural inclination to maximise investments, when for example, a better solution might be to repay debt.
Reply
22/10/2020 06:05:17 pm
Most people can easily find places to trim variable expenses and plan for periodic ones, and your lifestyle should align with your income, but making serious headway on the road to financial security may require a rethink of what you really need – including what you consider a fixed expense today.
Reply
Your comment will be posted after it is approved.
Leave a Reply. |
31/7/2020
3 Comments