Advisers' big fee hurdle
Advisers and the advice industry have a challenge to get clients to understand that financial advice is not a free good and that they will need to pay for it in some way, AMP's director of sales and advice, Blair Vernon, says.
Tuesday, September 13th 2016, 6:00AM 
5 Comments
by Susan Edmunds
Blair Vernon
Vernon said many consumers thought the idea of financial advice sounded appealing, particularly around KiwiSaver, but did not want to pay for it.
The Commission for Financial Capability has found similar attitudes in the wider population. A recent survey found more than 85% of people were apprehensive about their futures.
When asked what would improve their financial security, the most common suggestion was the need for free financial advice, planning and information.
Vernon said he had talked to one adviser recently who had met a potential new client, for whom he was going to prepare a plan in exchange for a fee. "The client was not keen at all, he thought it should be a service that is provided as part of KiwiSaver but that is not feasible for the adviser."
But he said the adviser knew the client was a keen cyclist, so asked whether he would expect to get his bike repairs for nothing, too.
The client said he would go to an expert for that because it was a sophisticated machine - and would pay $100 per hour. "He had no problem paying for that but thought financial advice should be free. That's comprehensive advice to cover the next 30 or 40 years of savings. They see it as words on a page but from the adviser's point of view, that's a piece of comprehensive analysis that they've got to stand behind. For people with KiwiSaver that's a great challenge."
He said a discussion about remuneration should form part of initial conversations between an adviser and client because it would promote transparency and remove any impression of a bias.
Advisers should disclose what fee they were charging, if any, or how they would be remunerated for any products they distributed, or how their salary and incentives would work if they were working for a provider.
He said clients needed to understand that an adviser would end up being paid one way or another.
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Comments from our readers
However when the adviser won't advise without also getting the implementation, and insists on an ongoing platform-based relationship, they make it quite difficult for us mug punters to see them as independent.
Sigh.
But as fee-based investment and savings advice becomes more prevalent, consumer expectations are gradually changing. Our experience is that those seeking such advice generally accept and expect to pay for it, particularly when their costs are reduced by rebated commissions and management fees.
Advice from the agents of product providers should be 'free' (in the sense that it should be part of the product cost).
Perhaps there are some bike mechanics who charge that much. I expect they work for a major brand that takes their reputation and the safety of their customers very seriously, and need to make sure that the technicians they employ put their bike riding customer's interests first. Well, they have an obligation to their shareholders, so that has to come first, but apart from that, bikers first. And they have to make sure they cover all their costs, staff, training, quality checks etc. But apart from that, definitely Bikers first. To ensure quality and consistency, maybe they supply their own high-cost bicycle parts, and have prescribed bike repair procedures that take more time and cost a bit more per hour, you know, to ensure the biker’s interests….
Bikers just need to understand that the owners of the brand need to be paid for their parts, and their shop and their technician's time, and training and oversight. It doesn’t matter how big or valuable the bike, or how capable the biker is of working some of it out for them self, they must all get super service that meets or exceeds best bike repair practice and buy that particular brand of parts when they come to the big brand bike shop.
Some bikers of course know how to do some maintenance them self. They prefer to shop around for their biking needs, and talk to their biking buddies about what bikes and parts work well for them. And when they need a knowledgeable technician they prefer to pop in to their local independent bike shop which stocks a variety of brands of bikes and parts, and can discuss the merits and features of them all. They will charge a reasonable hourly rate to do any required work, and some poorly designed and/or faulty parts will be replaced with sound, suitable parts.
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Regards
Brent