Are monthly subs the future of financial advice?

Subscription type fees are a way for advisers to charge for a financial planning, or even coaching service without getting involved in the regulated world of specific product, fund, investment recommendations or wealth management. Financial planning or coaching is not regulated by the FCA. It is certainly a good thing that such a service is being offered as it would help to some extent reduce the advice gap and may help a number of people. As financial planners however, we have ultimate responsibility in ensuring that our clients meet their financial goals, and in order for us to do this, among many other things, we need to oversee and be responsible for their investments and their investment behaviour. This would be difficult to achieve for a pure planning and coaching service. In terms of paying for financial advice, most clients tend to prefer to pay advisers from their pensions and investments rather than a flat fee basis from their after tax income however good firms should facilitate both types of charging.

It's difficult to say that financial advisers could operate subscription models in the truest sense. Netflix can scale the number of subscribers to their service without the same impact on their overheads as a financial advice business. Financial advice is bespoke and based on the needs of the individual client. This distinction is why financial advice wouldn't be subscription based in the future. However, financial advice in the future should be paid through fair fixed fees based on the complexity of the work. We charge our clients a monthly ongoing fee which isn't linked to the value of their investments, only the level of work required. One of the reasons we like to pay for things on subscription is it allows us to understand our outgoings clearly. Percentage-based adviser fees are a hangover from the commission days and need to go in the bin. They are often hidden away, and difficult for clients to easily equate to pounds and pennies. Clients could be paying way more than they would feel comfortable with, and their fees are subject to increases as investments grow.

Back to the future? As an industry we have had monthly subscription style services for many years, only most people did not know it! That is because they are badged ongoing advice fees. Most advisers will offer an ongoing advice service to clients paid for via ongoing advice fees from their investments. Even pre-RDR we had a similar option with non-indemnity commission payments. So this is not a new concept but it most certainly is a useful one for the right clients. Any options that remove the need for lump sum advice fee payments that many cannot afford must be good news for clients.