Don Stewart: An Adviser View on Soft Commissions
Warning on IP Premium Tax Deductibility

On Paying for Advice

Good advice looks easy. Most people want a shortcut. Just tell me which one. Tell me what to do. Make it quick, make it simple. Plus, advice looks kind of unlimited. Most decisions aren’t irreversible – so we assume that we can always change things if they aren’t quite right. The bliss of not knowing.

They don’t know the danger that ignorance brings.

So: people find it hard to pay for advice.

But they do want to have some expensive things. They would like the right to complain and get things fixed when they don’t work. They would like the right to bang the table and say – “But you didn’t tell me that!” if something goes wrong. That costs money, because to make sure advice, which sometimes comes with a recommendation for some action or behaviour to be taken by the client, and also, often, a specific financial product, is complicated. The six-step advice process requires care diligence and skill. Care takes time, so does research, skills are costly to acquire. Governance and quality assurance processes incur expense. Systems to support the whole activity need to be bought and maintained. Taking the time to follow up and coach people on sustaining their commitment to their financial plans is expensive too.

So, people have to pay for advice to get these things. Unless, they think they can get them for free.

Improving conduct regulation is probably vital for maintaining broad confidence in markets, institutions, and processes. Having said that, if you make conduct obligations very broad they will overlap substantially with the provision of financial advice – leaning against the need to pay for advice. Like everything, it’s a balance.

My latest piece on goodreturns (at this link) explores this theme a bit further.




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