For the wealth management industry, the month leading up to the ISA deadline is a time to increase marketing spending and seduce investors with promises of high returns, outstanding service and exceptional products.
The countdown to April 5 this year will, no doubt, be the same. However, with new regulations impacting on how financial advisers and wealth managers are remunerated, 2013 might be slightly different. Importantly, an adviser can no longer be lured into recommending a product by how much commission is attached to it.
While this is good news for investors, it has created massive headaches for some of the larger operators who will now need to hike service levels and broaden product offerings to ensure they maintain the same levels of income they have previously enjoyed.
Lee Robertson, chief executive officer at Investment Quorum, says it is a time for smaller wealth specialists to seize market share.
He explains: “Many of the larger players have had a torrid time, not just in terms of performance, but also in terms of their reputation. Boutiques have proven they are nimble and even the smallest firms are competing very well in terms of technology.”
An adviser can no longer be lured into recommending a product by how much commission is attached to it
As far as the investor is concerned, a professional service with supportive infrastructure and great products is the sought-after combination. Investors also expect their advisory firm to review their situation on a regular basis to ensure they are invested in the correct assets, markets and vehicles.
However, with new rules governing financial advisers meaning investors will have to pay for truly independent advice, finding the right provider and intermediary can be a tricky business.
Gordon Armstrong, a chartered financial planner with JLT Wealth Management, says the best deal may well not be the cheapest.
He says: “Investors should ask for an explanation on the range of services they can expect, and also the costs so these match what they actually need based on their circumstances and their specific requirements.”
The very best firms will normally offer you the initial consultation free of charge to enable the adviser to get a better idea of the purpose of the investment, the current financial situation of the individual or the family and the associated risk preferences.
Philippa Gee, founder of Philippa Gee Wealth Management, was a finalist at this year’s wealth manager of the year awards. She says a key component of product choice is cost.
“Clients want to know what the costs are of investments and have told me how hard it was to extract this information from other wealth management companies before signing on the dotted line, which is appalling,” she says.
“I will never cease to be amazed about how every single client I see is completely different. I see clients are reacting in a negative way to those organisations that offer a simple risk-graded investment portfolio; for example, when they fit the cautious risk tolerance, they get put in the cautious portfolio even though clients may prefer a more bespoke solution.
“I find that the mix of family issues, ethical requirements, risk tolerance, future plans and lifestyle requirements means portfolios have to be unique for each person. You also have to factor in the specific sector in which their business is based and what risk they are exposed to.”