The fee debate continued: will the regulator force advisers to change?

In last week’s blog, I asked if it was perhaps time for advisers to increase their fees. It seems the topic of fees is a popular one at the moment, with Money Marketing recently carrying an article that raises the subject of FCA scrutiny of ongoing fee structures.

The article references the FCA’s interest in how advisers charge and their concern that where advisers offer both one-off advice and ongoing planning, the vast majority of clients (90 per cent) end up in an arrangement with ongoing fees after taking one-off advice. The regulator’s feeling is that this may not be in the best interests for many clients, although advisers say this has come about due to clients preferring it.


A case study in the article by Robin Powell from Rockwealth is interesting. They have segmented their clients into three price bands: one for wealth accumulators; one for those in retirement; and one for high-net-worth individuals with more complex finances.

The fees they pay within those bands depends on a combination of value added, complexity and time.

The article goes on to look at what charging clients on an ad hoc basis might do to composure. If a client doesn’t have an ongoing paid relationship with an adviser, are they likely to seek advice during volatile markets or simply decide to make their own decisions, which could have long-term negative consequences for their investments.


We’ve been addressing composure in some recent work we’ve done linked to updating the questions included in our Financial Personality Assessment tool. Research shows that investor behaviour is the primary determinant of successful investing over time. “Fight, flight or freeze” instincts often drive the behavioural biases that undermine composure and can be financially ruinous.

Advisers have a key role in understanding how clients are likely to react and then coaching them to stay on track when the going gets tough. Without an ongoing fee arrangement with clients, the risk is this vital ‘steady as she goes’ coaching element could be lost, with the adviser and client having to address performance issues when it comes to review time, rather than focussing on the financial plan itself, as investments are just one element within that plan.

With so much to consider, it’s difficult for advisers who are used to charging for their services via an ongoing arrangement with clients to think about switching to a different set up, especially if they feel their clients are happy with the value that they are adding for the price they are charging. As long as advisers are transparent about fees with their clients, surely it’s up to the client whether or not they want to continue.

However, with the regulator taking a keen interest, advisers may find they are forced to review how they structure their fees in the not-too-distant future.