The UK financial services industry under MiFID and FCA guidance has been instructed to develop the highest levels of transparency on its fee structuring and information to clients. All elements of financial services have been subject to the MiFID requirement of showing the hard cash cost of undertaking an investment or product acquisition. It’s a brave new world. The oddly named, if you are a student of Latin or Greek, “ex-ante” and “ex-post” costing is now a part of our working lives.

To many, this is “what they already do” and clarity of pricing has been high on the radar between the IFA and the underlying client. In some cases, nonetheless the real hard fact that the client pays their DFM £2,000 and their IFA £3,000, in addition to other fees totalling £1,000 – is a sharp reminder of a cost that was once presented somewhat more softly in % terms, i.e. 1% seems softer than its £1,000!

There is a view that whilst this is fair and reasonable it is becoming apparent that with the proliferation of requirements to deliver paper/information to a client, it may now be reaching the point of edging toward a “negative” effect. By that it is meant that the proliferation of paper/information to clients on an ongoing basis is now so high, they don’t read any of it? The whole reason for protection is potentially being negated by constant delivery and driving lethargy on receiving so much paper.

In a DFM/Broker case for direct clients they now receive:

1. The initial in-depth report as to why and pricing,
2. A quarterly independent holding statement from custody agents,
3. A quarterly valuation statement from managers which includes a once a year “ex-post” review of charges, and
4. A potential 10% fall letter (as happened to some in the 4th quarter of 2018)

Therefore, a client may now receive 9-10 communications on his account, and that’s before any IFA communication. Heaven forbid that you have 2-3 diversified managers that could take it to as much as 30 communications per annum.

The result from my discussions on this subject, is that clients are generally just not opening these communications, or is it, knowing what they are, simply consigning them to the circular filing tray without proper review?

What was created in theory to protect clients, has indeed perhaps done the opposite, and in general (and I am sure not for all) made them apathetic to such communications.

This has however driven both a realisation of costs and a need for providers to have a good hard look at pricing. Excellent outcomes for clients. The industry is striving to reduce costs for clients where business propositions allow, and this can be seen at TAM in its note of 16th January 2019.

We now are pleased to have gone one step further, and with the use of institutional (and even occasionally “super”) institutional share classes, the cost of doing business has reduced markedly over the past 12 months, and astronomically since the heady days of RDR.

We are therefore pleased to show further client cost reductions below, as underlying TER/OCF falls in managed portfolios, all to the benefit of clients:/p>

In short, it is sad that the efforts to inform clients may not actually be reviewed by them given the preponderance of paper, but excellent client outcomes are improving if reduced cost is a discernible factor in that.