In this installment of Adviser Digest, we give a summary of the interesting stuff so far this week. Click on the title to read the full article(opens new window).
As advisers up and down the country are figuring out their ‘fee proposition,’ the FSA has been busy figuring out it’s own too! Don’t blame them; our friends in Canary Wharf have mouths to feed too! And, they have to look after their colleagues at FSCS, FOS and yeah… … the thorn in the flesh of many advisers, MAS!
However, while most advisers will hope to convey their fee structure to their clients in no more than one page, the FSA’s own ‘fee proposition’ is 98-pages long! Talk about leading by example!
The regulator plans to introduce an income threshold of £100,000 per adviser, below which a minimum fee of £1000 is payable! Firms with incomes of more than £100,000 per RI will off course have to pay more.
“We do not underestimate the concern that large and sudden increases in fees may cause firms, but we believe that the amounts are in absolute terms affordable in relation to their incomes, and that income measure provides a more equitable distribution of costs of regulation”
Advisers have until the 7 January 2013 to get their responses in and if you want to read the full paper, it’s here!
Talking about that all important word ‘fees,’ Alistair Cunningham of Wingate Financial Planning tells advisers to avoid haggling with their clients over fees. Writing in MM, Alistair makes the point that even when you have clearly set out your fees in, clients are often confused because advisers sometimes fail to articulate their value proposition and the ‘cacophony of confusing messages out there; ‘advice is free’, ‘the provider pays’, ‘commission will be banned’, etc.’
However, some potential clients have a wheeler-dealer’s approach when it comes to professional fees, often asking advisers to ‘match or beat another firm’s fees’ or ‘reduce the work or services undertaken.’ It’s every adviser’s nightmare.
This article raises the issue cross-subsidy again and whether it is fair to the firm’s existing clients. ‘I am of the mind that if we reduce our fees for client A, and client B is receiving the same service in all other regards, it cannot be fair to charge A more or less than B. It also seems unfair that some firms operate a policy of using existing client monies to subsidise the attraction of new clients’ Cummingham noted.
This interesting article in the Globe and Mail shows how our very own dearly beloved HMRC is using behavioural finance to reduce fraud and collect more taxes. Similar examples are also found across the pond in the US.
Apparently, the HMRC has an entire team of behavioural finance experts (Behavioural Evidence & Insight Team) who worked out that, if you make the tax system simpler, treat people like human beings and reward good behaviour, people actually tend to respond better, even when it comes to paying their taxes. Whaoo!
The team found out that by simply changing the wordings of HMRC’s letter, they can increase compliance by up to 6.7% in some cases. For example, simply pointing out that “9 out of 10 people in the U.K. pay their tax on time” – increased positive response by 1.5 per cent. Adding another sentence – “You are one of the few who have not paid us yet” – raised the success rate 3.9 per cent.
And guess what? The HMRC’s team also found compliance rose 6.8 per cent when taxpayers were told they were one of few people in their local areas who haven’t paid.
The team is lead by by Professor Richard Thaler, is the author of the book ‘Nudge ‘ which a fascinating read. David Cameron famously ordered his shadow cabinet to read over their summer holidays back in 2010.
The team published its findings titled ‘Applying Behavioural Insights To Reduce Fraud, Error and Debt‘ earlier this year.
Here’s a list of events in November you might be interested in attending;
Avoid Sleepless Nights: Getting to grips with risk profiling and investment mapping. An interactive Risk Workshop sponsored by Aberdeen Asset Management in conjunction with Paul Resnik of FinaMetrica.
Date: Wednesday 14th November 2012
Time: 3:30 pm to 5:30 pm
Location: Aberdeen’s offices at Bow Bells House, 1 Bread St, London EC4M 9HH
Getting off to the right start in 2013
Date: 29th November 2012
Time: 8:15am – 12.30 pm
Location: BlackRock’s offices, 12 Throgmorton Avenue, London EC2N 2DL
An interactive Risk Workshop sponsored by Allianz Global Investors in conjunction with Paul Resnik of FinaMetrica. Avoid Sleepless Nights: Getting to grips with risk profiling and investment mapping.
Date: Friday 30th November 2012
Time: 9:30 pm to 12:30 pm
Location: Rudding Park Hotel Follifoot, Harrogate, North Yorkshire HG3 1JH
I hope you have enjoyed this and hopefully it’ll make you job a little easier! As paraplanners, that’s what we do! As usual, thought and comments are welcome.