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When asked to name the most desirable qualities in a financial adviser, FT Money readers told us they wanted the three Ts — transparency, trust and tailored advice.

These are the criteria most have in mind when searching for a financial adviser, named in detailed responses from more than 300 readers, over two-thirds of whom are currently paying for financial advice.

Topping the list of their bugbears was any lack of transparency — particularly when it comes to fees.

Just over 7 per cent of readers who responded to our survey confessed that they did not know how much they were paying for advice. Many more took issue with the level of fees they were being charged, and the way these were applied.

The widespread practice of charging ad valorem fees — where advisers take a percentage of the value of assets under management every year — was particularly resented.

“Fees should be in £, not %” is how one reader bluntly put it.

“A fee based on the value of the total portfolio means that whether it goes up or down, the adviser receives a good fee,” said another. “Say my portfolio is twice as big as someone else’s. I then pay double their fees for the same two review meetings a year. Why?”

Other readers were frustrated at not being able to find an adviser prepared to charge fixed fees for investment advice. Some said they chose to manage their own investments for this reason, and only paid an adviser a fixed fee for specific services such as tax advice.


Restricted view

A linked complaint was “restricted advice” — the Financial Conduct Authority’s definition of firms that can only recommend products from a limited range, rather than the whole of the market.

About a third of readers who completed our survey confessed they did not know if their adviser was restricted or independent.

One reader made the point that by restricting the range of investment options, “the term financial adviser is a misnomer; almost all ‘advisers’ are just product distributors or salespeople and need to be treated with appropriate care and caution.”

There were many other comments about readers’ dislike of “fee-driven advice to buy particular products”, the feeling that advisers were giving them the “hard sell”, and “hidden fees and unknown commissions” contained within charging structures.

“Fees hurt,” wrote one respondent, bluntly stating the reason why 16 per cent of readers who did not have an adviser said they were put off from trying to find one.

Given the level of dissatisfaction over fees, the impact of regulatory changes should be a wake-up call for advisers and their clients.

Under the Markets in Financial Instruments Directive (Mifid II), introduced in January 2018, investment advisory firms have to provide clients with a breakdown of fees, detailing how much they are paying, and what for.

Fees will be individually detailed in pounds and pence; for example, instead of a client knowing that they pay 1.9 per cent a year for a £100,000 portfolio, the costs will be broken down, such as £800 for financial advice, £200 in platform fees, and £900 investment fund fees. A recent FCA document emphasised that firms must communicate “in a way that is fair, clear and not misleading”.

One reader commented: “Now that I’m seeing my fees in pounds, shillings and pence, I do wonder what I’m paying for. Never does it cost £20,000 a year to look after my products!”

Many in the industry believe that the regulatory shake-up will cause wealthy clients to question the value of the services they are paying for.

Charlotte Ransom, chief executive and founder of Netwealth, said clients often do not have an understanding of “the impact of high fees over time”. Although investment returns might look good, the net returns — once the cost of fees have been subtracted — tell the true story.

“Being wealthy doesn’t necessarily mean that you get a good deal,” she said, adding that Mifid II would be a “transformational moment” for the industry as many clients would wake up to the fact that “traditional wealth managers are overcharging”.

One reader who responded to our survey said that he would be prepared to pay more for good advice. He worked in the US for about 30 years, and had a “stellar adviser” who he paid $250 an hour for two hours of financial planning and tax advice a year.

“She required you to bring your last tax return, family budget, list of assets and your financial goals and concerns to the interview,” he said. “She was informed, incisive, raised alternative ideas, was non-time wasting and did not recommend particular funds or investments. I would have paid her, and would pay anyone in the UK who was as good, three times as much per hour,” he said.


Trusted service

The US approach echoes the kind of service that many UK-based readers told us they wanted to achieve.

Trusting their adviser was the most frequently mentioned term, but clarity, creativity in their thinking, honesty, independence and being a good listener were all qualities that readers named in their longer answers as adding value.

Other readers stressed they wanted an adviser who understood their individual goals and circumstances and provided “personal, individual, thoughtful advice”. Some wanted this to go beyond investment advice, and wished to “talk philanthropy, business and raising rich children” with their adviser to achieve “life objectives as well as financial ones”.

Provided that clients understand what they’re paying for and think this represents value for money, high fees are fine, said Matthew Fowler, director of Fowler Financial Planning.

“For anyone whose focus is purely on cost, there are better places to do it,” he added, emphasising that when it comes to financial advice, cheapest is not always best.

This attitude was reflected among our readers. Of those who were paying for advice, 38 per cent said they were “very satisfied” that they were getting good value. A further 41 per cent were “satisfied” with the level of charges, but just over 13 per cent felt they were “not getting good value”.

Although 43 per cent of readers have never changed their adviser, “any event that led to a loss of trust” such as “poor performance over a sustained period” and subsequently paying for an unsatisfactory service would prompt them to do so.

Almost a third of readers without a financial adviser named lack of trust and poor past experiences as reasons for this. In a survey of 13,000 people this year, the Financial Conduct Authority found that only 39 per cent of UK adults trusted financial advisers to act in the best interest of their clients.

Word of mouth

In contrast, those who have found a good adviser they trust wanted to shout about them. When we asked readers how they found their current adviser, just over one-third said it was a word-of-mouth recommendation from a friend.

Almost a quarter of readers said they followed the personal recommendation of a family member, colleague or other financial professional, such as an accountant.

The majority of advisers similarly described word-of-mouth referrals as their primary way of finding clients. Lindsey Hamilton, director of Logic Financial Services, said 80 per cent of her clients are referrals.

Building trust with an adviser goes hand in hand with readers’ overwhelming preference for receiving face-to-face advice. Despite the recent rise of robo advisers, more than 70 per cent of advisers surveyed said they were not worried about the future impact of low-cost digital platforms.

Top 10 topics raised by clients, according to advisers

  • Pension/retirement plans
  • Brexit
  • Tax planning
  • Fees
  • Recent market volatility
  • Investment returns/growth
  • Am I doing the right thing?
  • Financial planning
  • Inheritance tax
  • Risk mitigation/capital preservation

Ms Hamilton said: “It will never completely replace the value of face-to-face meetings and a person you can just have a chat with if you are worried about the world.”

Rob Roberts, financial planner at The Chester Partnership, said that advisers offered services that computer algorithms could not replicate, such as “setting goals, working towards set objectives and helping people to understand what is and — more importantly — is not available in terms of options and opportunities in the market.”

Alongside trust, transparency and tailored advice, one “T” to avoid was an expensive Hermès tie. To be fair, only one FT reader was so specific about the sartorial choices of advice professionals. But plenty of others remarked that those with “flashy offices”, chunky designer watches or expensive sports cars parked outside were communicating “fat cat” values — and almost certainly charging them too much.

Additional reporting by Claer Barrett

Strangest requests received by financial advisers

“Why should I invest now, given the potential for World War Three?”

We asked financial advisers to tell us about some of the more unusual questions they had been asked by their clients — and this was one of them.

Other advisers who responded to FT Money’s poll had clients ranging from a fashion fanatic who was eager to “liquidate part of her portfolio to update her wardrobe” to a treasure seeker who wanted to “turn his whole portfolio into physical gold”.

Some clients expected a lot in return for their fees. One adviser was asked: “Can you carry my son’s golf clubs across the City for me?”

Others relayed experiences of dealing with their clients’ marital strife. One adviser was horrified when a client pompously insisted: “Don’t tell my wife how much money I have — she’ll only spend it all”. Another had a client who asked how to hide assets from a cheating partner; a request the adviser turned down.

One adviser had to explain basic numeracy to a divorced female client worth £8m. “This was a classic case of the husband paying for and controlling everything, then when alone, she was unable to understand the value of money and assets,” the adviser said.

Others had touching stories of human kindness. Rob Roberts, financial planner at The Chester Partnership, described how a couple left a substantial bequest in their will to the travel agent who found them a hotel in Lanzarote, where they had subsequently holidayed every year for a decade. For his much-appreciated efforts, the agent inherited £300,000.

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