Over 90% of UK adviser firms have changed their approach to adviser charging in the last two years, according to our survey for the latest Platforum report – UK Adviser Market: Costs and Charges. The most glaring trend is towards cutting charges for higher value clients and increasing them for those nearer the bottom end of the scale.
Over a quarter of firms increased their charges across the board for all clients. Another 40% of firms increased their fees for just their low value clients and reduced their fees for higher value clients in order to stay competitive.
Advisers see this rebalancing of charges as a way to ‘increase fairness and transparency’ in their pricing structure, which was the main driver for the change according to over half of firms. It can also boost profitability. ‘Regulatory change’ was the second most cited reason for altering their charges.
In this context, ‘regulatory change’ encompasses several possible drivers, ranging from making their charges more transparent in light of MiFID II requirements and segmenting their client banks because of PROD, to putting their charges up to cover at least some of the rise in the FSCS levy, FCA costs and other regulatory expenditure. In particular, many advisers have experienced year-on-year hikes to their PI premiums, especially if they have advised on DB transfers.
Higher regulatory costs are continuing to prompt advisers to take a long hard look at their approach to the basic economics of their businesses. They need to cover their costs, which have been rising, and so charges to clients are on the increase. However, advisers are mindful of the optics of their charges on larger portfolios, thanks to MiFID II ‘pound and pence’ cost disclosure.
We will be discussing how asset management is at a crossroads and its future role at Platforum ID – the Investment Distribution Conference on 2nd October. Click here for more information.