How much would you pay to a person who would help you increase your income by several thousand pounds? We are talking about a return that should be made for a professionally crafted investment portfolio by a financial adviser. Or for a successful estate planning, advice on tax paying, or anything else by the same specialist.
Well, surprisingly (or not) 2 out of 5 British people in 40-and-over age group wouldn’t pay a penny to their advisers. It turned out due to a survey done by the US fund manager Legg Mason.
Britons underestimate such services even more than others – 1/5 of the surveyed would pay only about £50 an hour. Only the rest of the people would be prepared to be charged by standard prices. All the more startling is that high-net-worth Britons are Europe’s most cautious investors. A third of their portfolios are, on average, tied up in cash.
What makes this so important is the change in recent years in how financial advisers are paid. The Retail Distribution Review, which came into effect at the end of 2012, banned fund managers and savings providers from paying commissions to independent financial advisers. Instead, IFAs and investment platforms were obliged to charge explicitly for their services and to make those charges simple to understand.
With the new rules also requiring IFAs to obtain extra qualifications and to undertake regular training, the number of advisers fell sharply, with about a quarter leaving the industry. At the same time, most of the big banks stopped offering in-branch advice on cost grounds, with only HSBC continuing to advise customers with relatively little to invest. Barclays pulled out altogether, while the entry points for advice at Royal Bank of Scotland/NatWest, Lloyds and Santander are respectively £250,000, £100,000 and £50,000. The result is that millions go without any financial advice and a so-called “advice gap” has emerged between those who cannot or will not pay for financial advice and those who do.