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Adviser workshop: How to handle the KIDs conundrum with clients

We chat to advisers about the stick issue of KIDs, and hunt down all the best comment from the Twittersphere.

Helen says...

We intend on discussing the changes to key investor information documents (KIDs) with clients during annual review meetings. Clients must not only see the cost of the charges, but also the growth they have achieved annually.

When stakeholder pension legislation was introduced in 2001, it took a long time for fees to reduce in the pension plans. Hopefully the discretionary fund management industry will take note soon. You would expect lower charges to mean better returns and that has to be a good thing. Otherwise we will see more clients opting for passive management.

Top quote:

'I am concerned assessing suitability every year will just be an opportunity for some advisers to churn business. Only time will tell if I am wrong.'

Top tip:

Discuss the changes clearly in an annual client meeting, but also show the growth they have achieved.

Helen Howcroft is managing director of Equanimity IFA

Helen says...

We intend on discussing the changes to key investor information documents (KIDs) with clients during annual review meetings. Clients must not only see the cost of the charges, but also the growth they have achieved annually.

When stakeholder pension legislation was introduced in 2001, it took a long time for fees to reduce in the pension plans. Hopefully the discretionary fund management industry will take note soon. You would expect lower charges to mean better returns and that has to be a good thing. Otherwise we will see more clients opting for passive management.

Top quote:

'I am concerned assessing suitability every year will just be an opportunity for some advisers to churn business. Only time will tell if I am wrong.'

Top tip:

Discuss the changes clearly in an annual client meeting, but also show the growth they have achieved.

Helen Howcroft is managing director of Equanimity IFA

Alistair says...

I am not convinced the packaged retail and insurance-based investment products (Priips) rules are reliable. We are all for transparency. For more than 10 years, we have been quoting total expense ratios, platform fees, advice fees and so on in a Mifid and Priips-friendly kind of way.

My understanding of the current Priips rules is they are modelled fees and there is no single prescribed way for how they have been calculated. So you could have two companies with different methods, meaning even if they are accurate, you cannot say that one is actually more expensive than the other. As a result, it is unreliable and causes a pretty fundamental problem.

You want to give the best indication of cost in a reliable way. Whether it is KIDs or Priips, the best way to do that is just say: ‘this is the cost of funds, this is the cost of platforms, these are the advice fees’, and if there are other fees then that is the bundled cost.

Top quote:

'What is in the client’s best interests is maximum transparency, but modelled fees can be potentially flawed.'

Top tip:

Focus on giving the best indication of cost in a reliable way.

Alistair Cunningham is director at Wingate Financial Planning

The best of Twitter:

Mike Barrett (pictured above), consulting director at the Lang Cat, said:

'It seems advisers see it as a "known unknown". With the inconsistencies of approach and lack of info from fund groups and platforms, they are crying out for help...'

Joel Adams, founder and chartered financial planer at Lift Financial, said:

'We just need them to force vertically integrated firms to do the same now!'

Nathan Fryer, director at Plan Works, said:

'I have no issue with transparency. It is the calculation methods that appear to be artificially inflating the costs.'

Comment & analysis

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