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Adviser charges - the Chase de Vere view

15 November 2016

Many articles have been written about financial advice charges. Unfortunately some of these seem to focus only on the actual advice charges themselves and not on any additional charges or on what people actually get for their money.

Looking at some of the detail in these articles I'm also not sure that all firms provide accurate information. We do a fair bit of competitor analysis and so I have a good understanding of what other firms do and how much they charge; this isn't always reflected clearly in the articles I've read.

Advice charges are important and should be a key factor for many people in deciding which adviser they want to work with. However, they should not be looked at in isolation.

The starting point is to recognise that financial advice isn't a commoditised service. There can be major differences between the advice and service offered by different firms. Here are some key differences you need to consider:

1. Independent versus restricted advice

It is important that you know whether your adviser provides independent or restricted financial advice. This can impact on the scope of advice they give and on the actual advice itself.

An independent financial adviser can provide advice across all financial planning areas and recommend all retail investment products from all providers across the market.

Restricted advisers, as the name suggests, are restricted in what they can recommend. They either limit the areas in which they provide advice and/or they only recommend products from a limited range of providers or might just sell their own products.

Most of the larger advice firms give restricted rather than independent financial advice.

Chase de Vere believes that independent financial advice is the gold standard. We believe that getting independent financial advice will ensure that the recommendations people receive are completely unbiased, unrestricted and in their best interests.

You would expect to pay more for independent rather than restricted financial advice, although often this isn't the case.

Chase de Vere only gives independent financial advice.

 2. Adviser or product provider

You should understand whether your adviser is likely to recommend their own financial products or instead research the market and select the best products available.

Many well known restricted advice firms such as St James's Place, Hargreaves Lansdown, Tilney Bestinvest and Towry sell their own products, investment funds or platforms. Some companies will sell only their own products while others will sell their own products alongside those from other providers.

If you are using an adviser which sells its own products, investment funds or platforms you need to be aware that they will be earning more money by selling these rather than by recommending third party products. In this situation any financial advice fees you pay will only be a part of the overall charge they will impose.

You could therefore conceivably pay what looks like a lower financial advice fee, but then end up with higher product, fund and platform charges, meaning that overall you're not getting a good deal. Some of the most expensive products, investment funds and platforms on the market are sold by restricted advisers.

Chase de Vere doesn't have its own financial products, investment funds or platforms. This means we select the products we believe are the best value on the market for our clients. 

 3. Advice delivery

There are different ways in which financial advice can be delivered.

Traditionally financial advice was given face-to-face by a qualified and regulated financial adviser. Many advisers, including Chase de Vere, still give advice in this way today.

However, there are also an increasing number of firms which give advice by telephone, email or solely online. These models can be cheaper than face-to-face advice as there are lower costs involved in running centralised advice services and this could be reflected in lower charges for customers..

The right approach for you will depend on your own personal preferences.

 4. Ongoing service

For many people this is very important. Financial advice isn't usually just about 'fixing' your finances, but rather it is about making sure they're set up in the best way to meet your personal and financial objectives and then to monitor this on an ongoing basis to ensure everything remains on track.

Different advice firms can provide different levels of ongoing service. Some, such as Chase de Vere, will arrange regular face-to-face meetings with an adviser where progress is discussed and any further actions are agreed.

Other advice firms might offer more remote servicing or in some cases there is no ongoing service provided at all.

In terms of charges you can expect to pay more if you want a personalised service where your adviser is looking after you on an ongoing basis. You should be able to find lower ongoing charges if you want a more remote or more basic service or if you don't want any ongoing service at all.

 5. Percentage or time-based fees

Most adviser firms charge percentage fees. This is where their charges are worked out as a percentage of your investment and/or pension assets.

A 1 per cent per annum percentage fee isn't uncommon and this is what Chase de Vere charges. If a firm appears to be charging less then it is possible that they aren't giving face-to-face advice or they are giving restricted advice and so perhaps are also earning money from selling their own products, funds or platforms.

If your investment assets increase in value then the overall adviser charges will also increase. Similarly if your assets fall then the adviser charge will fall.

The alternative is to pay time-based fees. These are usually worked out with an estimate of how much time will be required to provide you with the advice, related administrative work and ongoing service.

Chase de Vere also offers the option of paying time-based fees. The amount you pay depends on your circumstances and objectives. We charge £250 per hour for independent financial advisers and £80 per hour for administrators. So your overall charge would depend on how much time of each would be required, with your average hourly charge somewhere between the two.

Chase de Vere advisers discuss the percentage and hourly fee charging options with their clients and between them agree the best approach to take.

Summary

You need to understand how much your adviser charges and how you will pay these charges.

However, this alone isn't enough for you to pick the best adviser for you. You wouldn't buy any other non-commoditised product or service by simply just picking the cheapest one.

You also need know to whether the adviser offers independent or restricted advice, whether they sell their own products, what services they offer and how these services are delivered. With this information you will be in a much better position to make an informed decision about what is right for you.

What next?

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