Most of us seek value for money, whether it be buying kitchen appliances, a car or booking a holiday. Buying investments and/or taking financial advice should be no different, but in practice it’s much harder.
Whereas a trawl of online reviews followed by a price comparison should net you a reasonable deal or even a bargain for most shopping these days, it doesn’t work for financial advice.
The reason? Very few advisers publish their charges online. Many will usually keep schtum until you’re sat in front of them, perhaps in the knowledge their fees are a deterrent, so they like to suck you into their sales process beforehand. And in the worst cases they’ll size you up, perhaps trying to justify exorbitant fees because they’ll save you a bit more than that in tax - balderdash.
And even when you’ve chosen an adviser, it’s hard to know how good their advice and service will be. There are a few websites that attempt to rate financial advisers, but given their business models typically revolve around selling leads and/or advertising to the advisers featured you can’t be sure they’re impartial. If you’re lucky you might get a good recommendation from a friend or relative, but even that can be haphazard.
The only way I can see this being at least partially resolved is the FCA compelling advisers to openly publish their fees along with a set of example scenarios, so that potential clients can more easily compare price.
An area where the FCA has been more proactive is investment funds. Funds have long had to display their charges, and this has been tightened in recent years. Annual charges must now include previously hidden fees, transaction costs (arising from dealing within the fund) must now be published and most recently fund managers must publish documents showing whether their funds offer value for money.
However, based on Hargreaves Lansdown’s recently published value for money document covering its own multi manager range of funds, I don’t hold much hope these documents will be either useful for investors or change fund manager behaviour.
Hargreave’s document confirms all but one of its funds underperformed its sector average over three years (to 30 September 2019) and all those with a five-year track record underperformed over that period. Yet it appears to conclude its funds offer value for money.