There’s a very interesting debate going on in the UK at the moment around adviser fees. I contributed to it myself recently on this blog, arguing that although ad valorem and fixed fees both have their merits, fixed-fee models will gradually predominate.
But as well addressing how advisers are remunerated, we also need to look at how much they’re paid. What is a fair price for the value that advisers add?
Ultimately, these decisions are down to each individual advisory business. Clearly, the value offered by different firms will vary greatly. A price that’s far too steep for one adviser might be perfectly reasonable for another, and vice versa.
Robert Reid has written a very sensible article on the subject in Money Marketing. In it he says the following:
I am no fan of discretionary fund managers, or need active fund management. My preference would be for advisers to use a simple, low-cost, passive option such as Vanguard LifeStrategy funds. The recent announcement by Vanguard that it’s cutting the fees on Life Strategy funds again makes the case for using them even stronger.
That said, if an adviser does use a discretionary fund manager, then I agree with Robert that a fee of between 25 and 30 basis points would be more reasonable.
I also concur with him on the importance of transparency. “Clients need to be able to see what they are getting,” he says, “so they can appreciate it and compare it with alternatives. How we communicate our charges will be, for each of us, the long-term determinant of our success.”
Fees, understandably, are a very sensitive issue. But it’s also a hugely important one — and an issue we need to be discussing. Well done, Robert, for helping to stimulate debate.
You can read Robert’s article here:
Robert Reid: Can you justify your fees?
Vale ad valorem