A new study from Investec Wealth & Investment finds that independent financial advisers (IFAs) are divided over whether the cost of financial advice will rise or fall over the next five years.
The findings were truly split with 42 per cent of IFAs predicting total fees will fall, 32 per cent saying they will rise and 24 per cent suggesting they will remain the same. Other findings were that 74 per cent believe bespoke discretionary fund managers (DFMs) are justified in charging higher fees and just 3 per cent predict investment market conditions will become easier.
The study suggests that fewer IFAs expect DFMs offering a bespoke portfolio management service to reduce fees than those offering model portfolios: 60 per cent of advisers predict bespoke DFMs will either increase their fees or freeze them while 37 per cent of advisers believe they will reduce them.
Advisers predict that the popularity of bespoke DFMs among their clients will remain strong with 71 per cent forecasting demand will either increase or stay the same over the next five years.
A key reason for the continued demand for bespoke DFMs is the widespread expectation that challenging market conditions lie ahead. The majority (51 per cent) of IFAs believe that investment returns will be more difficult to generate over the next five years, over a third (37 per cent) believes returns will be similar and just 3 per cent think they will be easier.
Mark Stevens, Head of Intermediary Services, Investec Wealth & Investment, said, “Advisers are divided on what will happen to all types of fees but when it comes to investment markets, they are far more united in their belief that conditions will either remain similar or become even more difficult.
“In this environment, advisers recognise the additional value offered by bespoke DFMs and appreciate that this level of service is likely to cost more. However, given the continued strong demand for bespoke DFMs from investors, it’s clear that many clients have no qualms about paying for a quality investment management service and professional advice. A positive outcome for clients, their IFAs and DFMs.”