Taxbriefs Commentary Library

How to charge for investment advice

Danby Bloch, 22 Nov 2012


 

The way most advisers seem likely to charge clients after 1 January will limit their services to clients, and may mean that they ignore some of the most attractive investment opportunities.

The question is whether financial advisers/planners want to project themselves as holistic planners or as advisers on retail investments and few other products. There is of course no difficulty with confining the service to collectives, life policies and pensions etc., and that is what most advisers have done in the past. And the post RDR world will widen their offering to ETFs and similar.

But a number of advisers claim to go much further and the question is, how many really will?

The way that most advisers will charge, according to both research and anecdotal evidence, is based on the value of the investments under advice. Up front charges may be more than on-going charges and platforms will provide a convenient way to get paid.

There are, however, plenty of investments that don’t lend themselves to this charging structure. Most clients simply won’t be prepared to pay somewhere between 50 and 100 basis points on their value. The most obvious investments are in property.

I recall suggesting to a client that they should invest in central London flats to let to embassy staff on a gently geared basis. This was back in the early 90s and I know that it made them ridiculously rich – certainly compared to investing in most equity-based assets. Their portfolio of collectives and pension investments was depleted and I was worse off as a result.

I am still not quite sure how I should have charged. Perhaps a time cost or fixed charge basis would have had its merits – and might still.

 


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Danby Bloch

Editorial Director, Taxbriefs

Danby Bloch is the editorial director of Taxbriefs, chairman of city-based IFAs, Helm Godfrey and director of Nucleus, an independent wrap provider.

Over a period of more than 40 years, Danby has established himself as one of the industry's leading thinkers and  is a respected author, lecturer and trainer on tax and financial planning.

 

 

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