Investors’ money shouldn’t go into financial advisors’ pocketsPosted on
The financial services industry is in business to maximise shareholder value, and is rewarded for doing so.
Of course investors like you, reading this, trust Financial Advisors with your money; utilising our knowledge and experience in the industry to maximise your return.
But are we (Financial Advisors) as an industry really maximising the returns to the investor? Can we all look our clients – the investors – in the eyes and say “I am taking you to market in the most financially efficient and transparent way I can?”
For decades, insurance companies and wealth management companies have put their own financial gain above and before that of their clients’.
But what if you – the investor – could keep more of the profits for yourself; your future and your family, rather than give them away to the financial services industry?
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Providing investors with options
We all know returns are based on compound interest. A simple calculation of £500,000 invested at 6% growth per year, over 20 years, will give the client a profit of £635,000.
But why shouldn’t it be £832,000?
If that were your money, which amount would you want? One has total industry charges of 1.74%, and the other at just 0.93%. That is for a platform, a blended active and passive portfolio and an ongoing management fee.
If a Financial Advisor is offering a 1.74% proposition, does their client know they have other, more financially efficient portfolios available to them? Are they clearly offering both solutions so the investor can make an informed choice about what they want?
Earning investors’ trust
It’s not often enough, or indeed often at all, that investors are given options and asked to choose; naturally, you leave those types of important financial issues and decisions to your trusted advisors.
But this is where a thin blue line is drawn.
Traditional Wealth Managers have internal systems set up to deliver a particular service and they will much prefer that the status quo prevail, as it is more profitable to them.
But why should clients of Wealth Managers expect to be kept informed of new financial opportunities that exist outside their organisation? Why would Wealth Managers provide their clients with helpful information and an opportunity to move their money to a competitor at the Wealth Manager’s expense, even if it is in the investor’s best financial interest to do so?
The financial services industry is in business to maximise shareholder value, and is rewarded for doing so. The industry target is to grow its client bases and increase funds under management regardless of charges or performance.
But what would happen if all investors realised you could get the same return on your investment, the same consumer protection; and still had the backing of global institutional investment companies with the same or even better levels of advice and guidance, for less in investment and management charges?
Just imagine the positive press the financial services industry would get if investors expecting £635,000 at retirement received £832,000 because enough of us cared about our clients to make that change happen.
We do not need any more ‘new products’ to get investors to trust our industry. We need to look at ourselves in the mirror and start asking how we can make the fundamental changes to our industry to earn back investors’ trust.