When Consumer Champions Make Things Worse

A question for advisers: When was the last time a client demanded a fixed fee?

Clients do occasionally want a breakdown of their invoices. Not often, but when they do ask we are able to provide them with a full breakdown, every minute, listed and itemised into chargeable and non chargeable.

But the truth is clients are far more concerned with the outcome than the detail of charges. Maybe it’s a bit like having nuclear capability – having the ability (and desire) to be open about the detail of fees means that clients don’t need to use it.

Very few of the new clients we meet want lots of detail on our fees. They want to know what we can do for them. They want to have an idea of the cost so they can budget. But they rarely go shopping to compare our fees with others (something that is still very hard to do). Usually new clients have been referred by an accountant or solicitor, and are used to writing out a cheque for time. Bluntly, they rarely quibble our fees.

So when I read a headline like ‘IFAs fight back over calls for fixed fees’ I can’t help but wonder – calls by whom exactly? Not clients, that’s for sure.

The downside of such articles is that it can creates a false impression of the client/adviser relationship and puts off people from taking financial advice who may be far better off for having done so – even after the fees!

Of course, we don’t help ourselves. Many years ago I realised that the expression ‘fee based financial advice’ was actually a terrible marketing approach. What has the fact that it’s paid for by fees got to do with anything? You don’t see solicitors advertising ‘fee based legal advice’.

All day every day there are articles comments and blogs about how we charge for our services. How about a bit more focus on the outcome? Comments in the media from happy customers.

Now, before I’m accused of being disingenuous, I do get the idea that consumers need champions. I understand that the adviser/client relationship is one of trust and that this trust has been abused in the past by advisers taking big commissions. There are bad news stories out there, and it’s important the public are made aware of advisers recommending UCIS so they can be paid commission, to name one example.

I think Paul Lewis made a fair point when he talked about ‘ghosts of commission’. I don’t think a fixed 3% on all investments can be called a ‘fixed fee’. I get all that.

But I also think it’s true to say that clients don’t particularly care.

What clients care DO care about, in my opinion, is the following, in no particular order:

  • Will I be better off by taking this firm’s advice?

After that, everything else is either taken as proven (professional referral) or is checked out in the first meeting during the part of the ‘no charge consultation’ section about ‘what we do and how we charge for it’.

The fact that clients aren’t that interested does mean we need consumer champions. So keep up the good work Paul Lewis and your ilk, protecting the consumer for the more nefarious edge of the financial services world. But please make sure you stress that such instances are the exception, not the rule. If you do not, then we could find that consumer champions make matters worse, not better.

Champion the consumer. But also champion the good work most firms do as well.

Ovation is recruiting for an adviser and a paraplanner. Contact Chris for details


9 thoughts on “When Consumer Champions Make Things Worse

  • I don’t recall anyone ever demanding a fixed fee.

    The only clients that ever question the fees or ask for details on what exactly the fees are for are those that aren’t prepared to pay the fees in the first place.

    And because most (not all) of these clients already made their minds up about the fees, there is little we can do to convince them that they would, in fact, be better off by taking our advice even after the charges.

    So, I very much agree with you, Chris – if a client genuinely wants or needs advice, they will only care about getting that piece of advice and getting it right. Everything else is just noise.

  • Well ok, but it’s hardly surprising. There are three main parts to a fee – advice, product and fund (there are actually about 27) – and often the advice fee is now the largest. You yourself have written about the need to warn the public about other areas e.g. pensions freedoms, you can’t expect a far more liberal approach to advice fees, now it’s the largest fee, once the genie is out of the bottle.

  • Another good piece from Mr Budd.

    Two quotes struck a chord with me, firstly:

    “All day every day there are articles comments and blogs about how we charge for our services. How about a bit more focus on the outcome? Comments in the media from happy customers.”

    Spot bloody on, old chap. If we can demonstrate how we help clients the fee amount itself (and how it is paid) becomes secondary; important, of course, but secondary.

    Second quote, addressed to self-anointed “consumer champions” such as Paul Lewis reporting on the more nefarious (good word) areas of financial advice as if they were the norm:

    “…please make sure you stress that such instances are the exception, not the rule. If you do not, then we could find that consumer champions make matters worse, not better.
    Champion the consumer. But also champion the good work most firms do as well.”

    Trouble is, the plane landing safely at Heathrow is not news; the one that falls just short of the runway IS news. And thus it will always be, especially with the “glass half-empty / someone to blame” mentality that seems to pervade financial services media….

  • Hi Chris
    We work on a fixed fee for our initial advice. I’ve never had a client asking to pay as a percentage or by hourly rate. Evidence, I think, that you are right!

    What clients do want is clarity. When percentage fees are quoted, it’s often unclear what the percentage relates to.

    Advisers also need to protect themselves against clients. When clients complain, they often hone in on the fees. Where there is a lack of clarity over the fee (e.g. what the percentage relates to) or the service provided, then advisers are on a sticky wicket.

    The reason we dont hear good stories about IFAs is because we dont have a trade association working on PR on our behalf. And that’s because IFAs have been too tight to pay for one, so we reap what we sow.

    • Great point about the trade association Phil, although I’m not sure about the reason. I suspect it’s also down to the fact that those that exist do not seem interested in lobbying Govt, that IFAs find it difficult to agree, that IFAs prefer to criticise each other rather than work together for the common good, and many other reasons beside!

      • It’s sad that like minded advisers cant get together – we all look enviously at the impact of Hargreaves Lansdown’s PR dept.
        I do think that the IFP is missing a trick – if it were to ask its members for an extra levy for a beefed up PR operation, I am sure that this would benefit us all (and it might get more people to join the IFP!)

  • What Paul Lewis and most commentators seem to be oblivious to is that advisers have very, very rarely had any input to the amount of commission paid by a provider for product distribution.

    Even in recent times advisers have only been able to reduce commissions or to reorganise them into initial and trail etc.

    Why we allow this kind of debate which goes on blaming advisers for being commission hungry is beyond me .You can hardly blame anyone who takes what is offered as remuneration for doing a job. Who else is expected to complain about their pay rates being too high or is expected to reduce their wages to meet some consumerist lobby – I don’t know one do you ?

    The issue with remuneration is value and if you still use packaged products in your work then you need to be sure that they represent value both in cost and content.

    Work for your client and not for these parasites living off our backs.

    • Sorry Phil, don’t agree with the idea that advisers simply took money that was offered to them. Since I was a broker consultant in the late eighties advisers have been able to reduce their commission or to recommend a more tax efficient product but which paid less commission.

      However I don’t want to get into a debate as this wasn’t the point of the article, in which I am trying to suggest that we move the focus AWAY from remuneration and on to outcomes.

  • Hi Chris,

    We really will have to agree to disagree but back to your theme..

    In our little business as anyone can see from our website we have long led our pitch with a detailed description of what we do for you if you want to be a client and then in equal detail what you have to pay for our service. This approach has served us well and looking at the tens of thousands of hits from within the industry we have given others food for thought or not of course !

    Sadly looking at other industry websites they seem to reveal very little other than stuff about the firm and their advisers and for the most part very general hints about how people might pay.

    I do believe that if we are to ever get this issue that we need paying for what we do sorted in the public minds then we have to learn to be more open about our services and charges


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