Adviser low fees not a client priority
Investors are far more interested in selecting a financial adviser who is upfront and truthful than if they charge low fees and/or commissions, according to a State Street Global Advisors (SSGA) report.
SSGA's report, "The Price of Financial Advice", found that when selecting an adviser, "an adviser who charges low fees and/or commissions," ranked second-to-last among investors.
The top three criteria when selecting an adviser were someone who was "upfront with me and represents situations truthfully", "understands my financial needs and goals", and "acts and performs consistently".
The report also found that only 33 per cent of investors completely understood how they were paying their financial adviser. However, 53 per cent of financial advisers thought their clients completely understood.
While 18 per cent of investors said the most difficult part of working with financial advisers was that "I am not sure if I can trust advisers", 17 per cent said "costs are not transparent and I don't know how much I pay advisers".
SSGA managing director and chief investment strategist for its intermediary business group, Michael Arone, said: "If they don't understand how the financial adviser is paid, that's a problem because then they can't trust that the adviser is acting in their best interest".
The report said that investors also strongly favoured a flat fee or fee-based compensation because of their predictability and transparency. Over one-third (36 per cent) of respondents said it was because they would know how much they were going to be paying upfront.
"If an adviser uses a fee-based model or commission-based model, he or she may need to explain more carefully than an adviser with a standing fee schedule, which some may perceive as easier to understand," the report said.
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