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30% of UK's wealthy say advice more expensive post-RDR

by Danielle Levy on Apr 14, 2014 at 10:15

30% of UK's wealthy say advice more expensive post-RDR

Over 30% of wealthy clients say advice has become more expensive since the onset of the retail distribution review (RDR).

The findings form part of a study commissioned by Pershing, which also found that 22% of a 1,000-strong sample of wealthy individuals are considering changing their adviser or wealth manager.

This is a trend that proved most prominent amongst those who were aged 45 and under, where 34% said they were thinking about a shift.

On a positive note, respondents largely understood the benefits of RDR, with the vast majority taking the view that the outcomes had the potential to improve interactions with financial services. Likewise they felt fees for products and services were easier to understand and compare.

Wealth managers and advisers may also be relieved that 75% of the UK’s wealthy believe they are receiving good value for money from their providers. Moreover, 77% said they had an understanding of how their financial provider is remunerated.

When it comes to fees, less than one fifth of the sample preferred ad valorem fees, with fixed fees for each consultation proving the most popular option for 30% of respondents.

The second choice was a transaction or project fee dependent on the task.

The power of self-directed investing shows little sign of abating with 49% of the sample identifying themselves in this category. It could be deemed this figure shows how under-penetrated the mass-affluent and high net worth markets are.

Scorpio Partnership, which conducted the research on behalf of Pershing, concluded the finding suggests a 'huge opportunity' for wealth management firms that can meet this group's 'minimal advice needs'.

'There is an opportunity for wealth managers to engage self-directed investors with a high-value, digitally-enabled service,' Pershing chief executive Kevin Bonar. 

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2 comments so far. Why not have your say?

Neil Shillito

Apr 14, 2014 at 10:55

Advice is not more expensive post RDR, it is more transparent. It might be perceived by 'the 30%' to be more expensive, but that is based upon their lack of knowledge previously. Also don't forget that prior to RDR many firms took the money and did very little to justify it. The quality of advice is improving all the time; it has to, why on earth would you pay a premium if there is no benefit?

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Apr 14, 2014 at 11:28

Of course it is more expensive!

How else can Advisers make up for the disappearance of up-front commission?

In the past, asset-based fees were a component of total remuneration for IFAs - now it is the primary source.

It's still a bonkers way of paying Advisers as for the majority, their engagement is service-based and hence lends itself to hourly rates rather than ad valorem fees.

But, hey ho, that's what most IFAs want - to see income rise with markets (potentially) highly uncorrelated to the intensity of client service.

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