I had a very interesting conversation with one of our Financial Planners this morning.
He has met recently with three different clients each with quite unique financial planning needs but what they all have in common is that they have accumulated a number of existing financial products.
What has prompted their meetings with my colleague is that they really don’t know if what they have got is suitable for their needs.
They are each looking for wholly impartial and independent advice which is not influenced by commission payments from product providers.
They have chosen to meet with my colleague because our proposition fits their requirements. We provide advice which is independent of the need to buy a financial product.
So why am I writing about this?
Simply that we charge our advice fees directly to our clients which actually can, for some, be problematic.
Some clients are asset rich (in terms of pension funds, investments and property) but are also carrying quite large amounts of debt (mortgages, credit cards etc) and also have little in the way of cash reserves. The fact that we charge for our professional services by invoice can sometimes be a barrier to them engaging with us for our services.
Unfortunately the financial services sector has had a bad habit of suggesting to consumers that somehow financial advice is “free”. It isn’t and in fact it never has been.
This “free” advice was simply a device to hide the fact that it was paid for when the consumer purchased a financial product and commission was paid. And if they did not purchase a commission generating plan then the advice delivered to them was cross-subsidised by those consumers who did buy.
Some of the clients with whom my colleague has met have asked directly if the advice fee that they have to pay can be paid from any product that they purchase.
Whilst the answer is “yes”, we actually don’t want that to be the case because it does have the potential to distort our advice. If the way in which we are going to be paid is through financial product implementation doesn’t that imply that our advice will always lead to a product?
I was entertained and a little saddened by the comment that one of the clients made to our Financial Planner.
“We only see our IFA once every three years and each time he wants us to move our pension plan somewhere else!”
I believe passionately that what I want to come from the delivery of our advice service is that the client discovers that the products they have are perfectly suitable. Perhaps only having to switch underlying investment funds rather than abandoning the product and buying a new one with the costs associated with such a move.
What I want to make sure that our clients understand is that it is worth paying for advice that results in no or little change to what they already have.
Now that is truly independent and impartial financial advice.
