MSE News: Guest Comment: How financial advice will change for good

jem16

Rollinghome wrote: »

I'd assume when I said in that post "The fund was soft-closed to new investors earlier this year. The same terms apply to existing investors." most would be smart enough understand what I meant even if perhaps you didn't.

Strangely enough I knew exactly what it meant and gave the info that clarified it for those thinking about investing now. You saying it was soft-closed did not give enough info for new investors.

You said "Unfortunately, due to that soft closure, buying direct will see you needing a minimum of £250k and having to pay a 5% initial charge." which is not correct for existing investors.

Glad we now have it clarified for both new and exisiting.

jem16

jamesd wrote: »

Not the be all and end all but it is nice to know what you're paying each part of the chain for service instead of having people think that what say HL gets is the difference between AMC and TER or that it's really free.

I agree that it is worthwhile knowing - but that's me. I always wnat to know the little details.

However many are only interested in the final cost. After all when you but a washing machine, TV or car, you don't have it broken down into manufacturer cost, retailer cost etc. You just have an end cost of what it will actually cost you. For a lot of people that is all that matters.

If at the end of the day, the costs rise for some investors, they are not going to be happy and say - "Well at least I know who is getting what now!"

You might, or might not, find Fund rebate disclosures by platforms, COBS 6.4.3 tracking my experiences requesting fund manager rebate information interesting.

I saw that james - it is interesting, for me at least.

jamesd

Agree about knowing final cost being good but this is a situation where there's an inherent conflict of interest between consumer and provider:

1. The provider is deciding how the rebate gets split between parties.
2. In pressuring for higher rebates a provider might cause a fund management company to increase annual management charges so they can pay, to the detriment of the consumer.
3. For places like Hargreaves Lansdown with high no advice charges the disclosure is what reveals the high level of charging and might help some consumers to realise that they could get fully advised service for the same cost, or cheaper unadvised purchase elsewhere, after allowing for possible quality of service differences.

Mandatory disclosure is how the current regulatory regime tries to address those risks.

Rollinghome

jamesd wrote: »

Not the be all and end all but it is nice to know what you're paying each part of the chain for service instead of having people think that what say HL gets is the difference between AMC and TER or that it's really free.

Not only nice to know but possibly informative for anyone who assumes the sometimes surprising fund recommendations by such as HL are entirely objective.

gadgetmind

jem16 wrote: »

Is that because they don't read the paperwork given to them? All the paperwork I have received clearly states how much my IFA is getting.

If you try and read all the paperwork an IFA sends, you'd almost certainly fall asleep, drooling gently, about 1/10th of the way through, which would probably only be at page 150.

You get telephone directory thick wodges of woffle, and while some can speed/skim read, and separate the wheat from the chaff, many can't.

Sadly, it's also the case that the "nothing to pay up front" message seems to lure people in, which includes people buying furniture and cars now, houses in the past, and degrees in the future.

jem16

jamesd wrote: »

Agree about kn9owing final cost being good but this is a situation where there's an inherent conflict of interest between consumer and provider:

1. The provider is deciding how the rebate gets split between parties.
2. In pressuring for higher rebates a provider might cause a fund management company to increase annual management charges so they can pay, to the detriment of the consumer.

How do you feel those two will change with explicit charges?

jem16

gadgetmind wrote: »

If you try and read all the paperwork an IFA sends, you'd almost certainly fall asleep, drooling gently, about 1/10th of the way through, which would probably only be at page 150.

Most of the important facts can be found in KFD which is usely considerably shorter.

You get telephone directory thick wodges of woffle, and while some can speed/skim read, and separate the wheat from the chaff, many can't.

I agree. However how is that going to change when you start detailing all the separate charges?

Sadly, it's also the case that the "nothing to pay up front" message seems to lure people in, which includes people buying furniture and cars now, houses in the past, and degrees in the future.

All too true and more so with today's society of buy now, pay later.

gadgetmind

jem16 wrote: »

I agree. However how is that going to change when you start detailing all the separate charges?

I think the customer will twig when asked to write a cheque.

jem16

gadgetmind wrote: »

I think the customer will twig when asked to write a cheque.

The customer may never have to write a cheque - fess can still be paid from the product.

However what I meant was - how different will it be with an ubundled platform where you pay 1.5% typical amc and with an unbundled platform where you pay 0.75% to the fund manager, 0.25% to the platform and 0.5% to the IFA? S instead of a table of charges with 2 headings, we now have a table of charges with 4 headings.

gadgetmind

jem16 wrote: »

fess can still be paid from the product.

A bad thing IMO.

However what I meant was - how different will it be with an ubundled platform where you pay 1.5% typical amc and with an unbundled platform where you pay 0.75% to the fund manager, 0.25% to the platform and 0.5% to the IFA? S instead of a table of charges with 2 headings, we now have a table of charges with 4 headings.

I'm pretty confident that it will in time result in it being able to compare products and will drive down fees. Loads of IFAs are threatening to quite, and if they do, that's fewer mouths to feed.