Investors urged to question adviser costs

Jason commented: “A lot has recently been said about the extortionate level of investment management costs and how they can obliterate the value of a client’s portfolio.  We fully support the attention this has received recently and have watched, with a degree of embarrassment, the one sided nature of the argument being made by large section of the financial advisory industry”.    

Jason added, “Although we fully support the spotlight that has recently been put on the level of investment management costs, we as financial advisers have to be honest about the level of our own fees and whether we are really adding value to client’s affairs, or simply being someone else taking their pound of the investors flesh”.

The typical approach of 'charging a percentage of the value of a clients funds each year for managing their investments', is an approach that has today been branded an out-dated business model by Chatfield Private Client, who have now launched a new review service which is based on clients paying a fixed monthly retainer fee.

Adrian Pickersgill of Chatfield Private Client Limited said: “The old model where fees are based on a percentage of assets under management would lead to advisers charging a client with a portfolio worth £500,000 twice as much as a client with a portfolio of £250,000.  Is this fair? Is the adviser really adding twice as much value to the client with the £500,000 portfolio?

“Once you have added in the effects of inflation why should anyone invest at all.  Say, for instance, you are working from an assumed annual growth rate of 7%, which is a standard industry projection.  Deduct long term inflation at say 3%, investment management costs at 2%, and adviser costs at 1% and you the investor (the important one here) will be left with a real rate of return of 1% per annum.”  
The Bank of England commented in its latest quarterly inflation report that rising raw material prices, energy bills and next year's VAT rise meant inflation would remain high next year.  Although there is very little an investor can do to change the prevailing level of inflation, there are things they can do today to reduce the level of investment management and advisers costs.
The real question, according to Jason, is how many investors will actually take action today to give them a fighting chance of achieving their dreams?  The disappointing thing is that many will continue to accept the current situation, preferring instead to accept that their dreams for a financially secure future will instead disappear into the profits of fund managers and financial advisers alike.
You have to look at yourselves for your own situation, before you start blaming others.
Chatfield Private Client Limited is an independent, fee only firm of Chartered Financial Planners specialising in pensions, investments, lifetime cashflow planning and tax planning techniques and is currently offering a free pension and investment review service.

For more information, visit www.chatfieldprivateclient.com