Yo, the party’s over for those money-grabbing financial advisers! For years, these wealth managers and financial advisers have been raking in the cash without breaking a sweat. They were like the gatekeepers to the secret world of investing strategies – and they could charge whatever they fancied. Their clients were usually the super-rich, who probably didn’t even notice or care about the hefty chunks being taken out of their fortune, as long as it was well taken care of and growing.
But guess what? The gig is up for the old boys’ club.
The industry has hit a major turning point. St James’s Place, the UK’s biggest wealth manager with 900,000 clients, just announced that they’re slashing fees and ditching those nasty exit charges. This move comes after some serious heat from the City regulator, the Financial Conduct Authority (FCA). On top of that, the company’s share price took a nosedive by more than 40% this year, and claims management firms say they’ve clawed back millions of pounds for clients who were paying for advice they never got.
But the real game-changer here seems to be the FCA’s Consumer Duty. These new rules, which kicked in this summer, require companies to prove that their customers are getting a fair deal – or else face the wrath of the regulator. In theory, this should mean no more unreasonable charges and no more sneaky terms hidden in the fine print.
Sure, there are some financial advisers who genuinely care about your interests rather than their own. But let’s face it, financial adviser fees have been a total mystery for way too long – and they’re not cheap or easy to justify. They’re also charged as a percentage of your fortune, rather than a flat fee.
In the sea of costs, there are initial advice fees for setting up the client’s financial situation and tailoring a strategy to fit their goals. Then there are ongoing advice fees charged every year – even if the client’s situation or goals haven’t changed. And let’s not forget those pricey exit fees that keep customers locked in with their wealth manager, bleeding them dry.
Advisers have been losing their sweet perks for a while now. They got the boot from pocketing commission from clients’ investment portfolios a decade ago. And just four years back, St James’s Place axed incentives for advisers like cruise trips, luxury watches, and cufflinks.
The financial advice game has been rocked by scandal, from dodgy pension transfers to dodgy selling. No wonder less than one in 10 of us has ever sought advice from a money manager. It’s a shame because a good financial adviser can seriously boost your bank balance.
Another thing to consider is that investing has become more accessible with the rise of DIY investment platforms, and those sky-high fees just don’t cut it anymore.
Smart savers can do their own homework and make their own choices. Why should they fork out a fortune for something they can handle themselves?
And to top it off, fund managers are consistently getting outperformed by passive funds that simply track the market. It’s got a lot of consumers scratching their heads, wondering what they’ve been shelling out for.
A top-notch financial adviser is worth their weight in gold for the right client, but this industry shake-up is long overdue.
Ben Wilkinson is the head honcho at Telegraph Money. Hit him up at [email protected]
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