We hear many stories of consumers who give up taking advice from their IFA because they have had a ‘lightbulb moment’ when they realise that they are paying rather a lot for the advice that they are receiving.
I read a good example of this in the newsletter of a well known self directed investment platform.
The client had realised that whilst he was the one making the investment recommendations (following research he did in the weekend newspapers) the IFA his adviser was simply passing on investment instructions to his SIPP provider and then pocketing up front remuneration.
The client observed that he was paying 6-7% in charges before he even made a penny for himself.
A further observation that he made was how SIPP charges could be “complex and excessive”; it is difficult not to empathise with both of these observations.
6-7% charges! My goodness that sounds outrageous!!
SIPPs charges can be complex and excessive; well they certainly don’t have to be.
But the individual needs to be very certain of what the are doing when they give up taking advice and start to DIY.
We believe that very many people are able to DIY and the Internet is certainly empowering them to set up and manage their own pensions, ISAs and General Investment Accounts.
But equally very many need advice.
We also think that a kind of hybrid situation is emerging with consumers dipping in and out of advice as and when they need it.
For example they may decide that they need initial advice to create a suitable investment portfolio, determine contribution levels and for example the advantages and disadvantages of consolidating existing arrangements.
Many need good solid financial planning advice to get them on track to achieve their financial planning goals.
But once the plan is established they may well decide that they can manage their investments online themselves.
Or perhaps every now and again they need to dip back into the advice world and get an update and validation of their investment strategy.
We think this will happen more and more in the future and will result in a much more competitive product world where high initial charges certainly 6-7% become a thing of the past.
Instead advisers will understand that the value is in the advice not the product and rather than charging the client for selling them a product they will charge for selling advice.
Photo credit: Flickr/NVinnaco
