Report identifies ‘fee transparency gap’ in financial advice market

Advisers have been warned of a ‘fee transparency gap’ the UK financial advice market that is creating a disconnect between advisers and clients, despite overall satisfaction with the value of advice, according to Unbiased.

Its research highlighted a ‘significant disconnect’ between how advisers say they charge and what consumers understand, which it argued was creating unnecessary pressure on advisers.

More than a fifth (21 per cent) of advice clients did not know how they were being charged, with this being compounded by a lack of accessible information, as 70 per cent of advisers did not make their fees publicly available on their websites.

This lack of upfront transparency was creating friction for the advice industry, according to Unbiased, with 37 per cent of advisers having experienced increased pressure to justify their fees in the past two years.

Despite this, 79 per cent of advisers believed their fees were appropriate for the value they provide.

This was supported by the fact that 76 per cent of clients were satisfied with the advice they had received, and 85 per cent said they felt more confident about their financial future as a result.

The primary benefits were found to be increased peace of mind (65 per cent), a better understanding of their finances (51 per cent), and clearer path to achieving financial goals (46 per cent).

Unbiased said the findings suggested pressure on advisers’ fees stemmed from a breakdown in how value was communicated, rather than an overall lack of value.

It highlighted that consumers actively seeking advice placed the greatest importance on advisers’ specialist expertise and a trusted personal connection, not cost.

More than half (51 per cent) of consumers surveyed cited specialist expertise as an important factor when choosing a financial adviser, followed by trust and personal connection (49 per cent), clarity of communications (43 per cent), and qualifications and experience (41 per cent).

The cost and fee structure of the advice was cited as an important factor by 30 per cent of consumers.

“Our research has uncovered a crucial paradox: consumers are overwhelmingly happy with the advice they receive, yet the industry’s lack of transparency around fees is creating a fog of confusion that puts advisers on the back foot,” said Unbiased chief revenue officer, Matt Cockayne.

“This isn’t a value problem; it’s a communication problem. For advisers, the path to scaling their business lies in bridging this transparency gap before it costs them a potential client.

“The fact that one in five clients doesn't understand their fee structure should be a major red flag for the industry. Advisers are delivering life-changing value, but they are being let down by a failure to communicate it clearly from the start.

“Advisers who can clearly articulate their fee structure and, more importantly, demonstrate their value through the life-changing outcomes they deliver will have a decisive competitive edge.”

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