There was an interesting article written by a fellow IFA in Money Marketing magazine this week.
He stated that unless a prospective client agreed to an ongoing review service he would not take them on as a client to provide them with advice in the first place.
His argument, using the analogy of a plumber servicing his central heating boiler, was that the client was likely to need advice in the future as economic and market conditions changed.
If they had not signed up for the review service then the work he would have to do on an ad-hoc basis was intensive and the fee he would seek to charge would be the equivalent of all the review fees he should have charged (his charging structure is 3% of the money invested plus 0.5% per year) in the years between the original advice and the need for a review.
He further went on to state that those clients who invest money but don’t have the review service are the ones who are likely to complain about the unsuitability of the original advice when the investment market conditions deteriorate.
Of course these are his views, he is entitled to them and they are presumably borne out by his own experiences and he is an experienced adviser.
My view though is somewhat different.
I cannot see any reason why a client cannot select from a menu of the services that we provide.
It could be for example (and I have dealt just this week with a lady like this) that my client already has a suitable investment product (in her case an online ISA and General Investment Account) and whilst she has purchased advice from us about its continued suitability and the need to rebalance the investment funds she holds, there is no question of us compelling her to buy our annual wealth check service.
Why shouldn’t she be allowed to buy such services as and when she needs them?
We have clients who buy advice from us and are then perfectly willing and able to execute any product transactions online.
We charge for the advice and if they come back and ask for further advice in the future we charge appropriately for that. But we don’t insist that they sign up to any servicing contract with us unless of course they wish to (and unsurprisingly many do).
I do think that the role of the professional financial adviser is changing (has changed) and that valuable advice can be delivered without in many cases the need for the client to buy any financial product at all.
Perhaps the real challenge for many IFAs is breaking that link between advice and product.
In the old world (and for many advisers in the new world) the only way they would get paid would be if you purchased a financial product (in the old world it was commission in the new world it is called adviser charging).
Advice and financial planning is a valuable service. So is the wealth management or ongoing review service.
But paying for it should not be conditional on buying a product. And how you pay for it should surely be totally transparent?
As much as we want our clients to buy advice from us, charge them to implement any product solutions and have a long-term wealth management relationship, it must always be their choice.
