Valuing fees: coffee with a twist
Our observation in Anticipating the Retail Distribution Review that the business model for financial advice will not change unless and until customers learn the value of paying fees for a professional and independent service was echoed in an article in the Observer yesterday by Heather Connon.
As well as quoting us, Heather quoted insurance-company analyst Ned Cazalet referring to ‘research showing that three out of four consumers say they would not pay for financial advice and even those happy to do so would baulk at a fee of more than £75’. Added Heather: ‘hardly enough to pay an adviser’s coffee bill’. Viewed differently, the full likely cost of commission bias for an investor contributing £5,000 pa in real terms every year for 40 years is an outcome reduced by £200,000 (also in real terms). That’s about £90,000 in present value terms. That pays for a lot of advice as well as a lot of coffee.