How can we remove barriers to enable more people to access advice?
It’s a question that regularly crops up when I speak to advisers around the country — and with good reason.
According to the St James’s Place (SJP) Real Life Advice Report, published in September, a staggering 24.6 million UK residents have never received any kind of financial advice or guidance.
The ‘Great Wealth Transfer’ is already under way, with an estimated £5.5trn of assets set to be handed down the generations between now and 2050.
This will only fuel the demand for expert advice over the coming months and years. So, what is the profession doing to ensure those who need it get it?
Rabbets points out that being able to access advice for free goes against all the work being done to articulate its value to clients
One debate is around initial advice fees — and whether scrapping them altogether may be a way of opening doors that have otherwise been firmly shut.
NextWealth’s Financial Advice Business Benchmarks Report, published in October, shows the average initial advice fee is now £1,995, up from £1,800 last year.
However, what’s fascinating is the big rise in the number of firms choosing to not charge one at all, up twofold to 23% in 2023 compared to 2022.
Could removing this upfront cost really be the way forward? Capital Asset Management CEO Alan Smith believes so.
“You don’t really want to create barriers like making it too expensive,” he says.
“Increasingly, I think firms are minimising any barriers to bringing clients on because they can see that the real value is in developing an ongoing relationship. If you work at bringing them on and building up that relationship, I think it’s commercially acceptable to waive any significant fees or costs.
Larger firms with more than six financial advice professionals are more likely to not charge an initial fee
“For most clients, we won’t charge an initial fee, except in highly complex cases, as we want to work with them and get them up and running.”
Onboarding a client is “often just a bit of admin”, adds Smith. It involves “a bit of paperwork, a few meetings and that’s about it, so charging just doesn’t make sense to me, really”.
Verve Foundation head Hayley Rabbets agrees that building a long-term relationship is important. However, she questions whether such a relationship will be as strong if clients don’t appreciate the value of it from the start.
“Being able to access advice for free seems to go against all the work we’re trying to do to articulate the value of financial advice,” says Rabbets. “By giving the client something for free to start with, are we then creating an expectation?
There’s a risk the client may leave after the initial advice has been implemented
“I’m all for updating fee structures, but I don’t think giving away advice for free is the answer.”
Very fine balance
The NextWealth report has also found that larger firms with more than six financial advice professionals are more likely to not charge an initial fee. But Rabbets says this makes it even more difficult for smaller and newly established firms to succeed, and could even lead to some going bust.
“It’s a very fine balance between removing barriers to advice and ensuring there are enough successful firms to provide it.”
Could removing this upfront cost really be the way forward?
She also warns of a risk that the client may leave after the initial advice has been implemented.
“There’s a hell of a lot of work associated with new clients, so this could have a huge impact, particularly for one-person firms,” adds Rabbets.
According to the regulator, advisers generally command an average of 2.4% of the amount invested for initial advice. But many charge more. For example, SJP, the UK’s largest advice firm, says on its website that it charges 4.5%.
Meanwhile, Quilter’s initial fees range from 0% to 4%, with clients typically paying between 1% and 3% of the sum invested, depending on the complexity of advice provided.
What’s fascinating is the big rise in the number of firms choosing to not charge a fee at all
It’s obvious that scrapping the initial fee wouldn’t magically result in millions of people seeking financial advice, but it’s equally clear that some kind of intervention is needed.
‘To fee or not to fee?’ is certainly a question that advice firms will ask themselves as they strive to attract more clients.
Dan Cooper is news editor
This article featured in the December 2024/January 2025 edition of Money Marketing.
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So taking on a new client only”involves a bit of paper”, what about the suitability report, those PI bills, FCA fees, the % taken by a network or external compliance consultant.All before paying the wage of whoever on the staff is going to produce the “bit of paper”.If you are tempted to wave an initial fee then consider separating the advice from its implementation.
Go to a lawyer with a problem you wont be charged for the first meeting, when they do the work you will be charged. If we work for free it shows how little value we place upon ourselves. Long before my retirement, a generation before RDR, I was occasionally asked by a client if i would charge a fee rather than take commission, the answer was always “yes” with my hourly rate set at the rate of the most expensive solicitor in my city. The value our clients place on our advice is a reflection of the value we place on our selves.
A laudable idea but unaffordable and, as stated, it undervalues the advice and the effort, skills and knowledge that go into delivering it.
Trust me, if you overcharge or underdeliver, a good client will soon let you know!
Shocking. I think this reveals the self-centred motivations of some adviser firms, i.e. maximising their own value rather than that of their clients. Firms charging in this way realise the long-term revenue (to them) of on-going fees is far greater than the sums generated from initial fees so why not remove that “barrier”? Personally I think most clients would be far better served by simply charging an hourly rate for the work actually done be that initial or on-going.