The perceived cost of financial advice is the main factor discouraging consumers from seeing a wealth manager, and consumers have unrealistic expectations about the price they can expect to pay for advice, according to research released by Old Mutual Wealth this week.
The research took place in the UK market, but the findings will have familiar echoes around the globe. According to the survey of 1,400 UK adults, 37% said that ‘the cost of getting advice’ was an issue that put them off seeing a financial adviser.
When asked what they would be prepared to pay for advice, 44% said that they would not be prepared to pay a fee. A third said they were unsure and 15% said they would pay only up to £250 (US$380). Indeed, 31% said they feared ‘paying for something they didn’t need’ and 15% weren’t convinced an adviser could offer value.
There were some findings that will chime with the wealth advice market in Canada, the US and Australia too, specifically that 19% of respondents were unsure which advisers to trust and 30% said they believed advisers may be biased toward some products.
A report on Wealth Professional
last week highlighted concerns over transparency of fees and the performance of client investments. In Canada the implementation of CRM2, which is to be completed by July 2016, is designed to shine a light on all wealth management businesses and enhance transparency.
Speaking to Wealth Professional
, Kathy Waite, who describes herself as an unbiased fee-only financial planner, operating as Your Net Worth Manager, agrees that consumers are overwhelmed by jargon, perhaps deliberately, and have no idea how to evaluate performance of their accounts to the market.
Waite said that there is an element of bias at play, of course banks would be expected to push their own products, but there is also a more hidden side to the industry concerning 'independent' advisors offering products from mutual fund dealers that have their own products. This means that representatives would be incentivized to sell in-house products, making them less independent.