Advice and investment fees in Ireland are pretty opaque across the vast majority of the market with a common myth over the years being that a “1% AMC” is the total cost. In the absence of fully transparent pricing across vast areas of the industry, what is a realistic view of the true total cost of investment advice in Ireland?
There are some interesting data points in the UK from a survey carried out by FCA (link here) in 2020, which studied the advice market post RDR. These might be useful for showing clients your advice fees versus average fees in the UK in order to evidence the fact that they are in line with, or in fact, less than fees in a larger and more transparent marketplace. We have no similar industry wide data for Ireland but the FCA study puts the reality of fees into some very useful context and allows for a realistic comparison with something real rather than comparing against the mythical “1% AMC”.
According to the FCA research the average cost of ongoing advice in the UK is 0.8%, so on that basis, clients in Ireland should in fact be very comfortable paying the typical 0.5% per annum advisers charge for advice in Ireland. Meanwhile paying 1% or 2% as an initial fee in Ireland may be deemed quite reasonable versus the average of 2.4% for initial advice in the UK.
In total most clients utilising a transparent and comprehensive platform solution in Ireland are probably paying between 1.5% to 2% all in, which seems very reasonable when contrasted this with an average 1.9% total ongoing charges in the UK according to the FCA paper.
All parties across the advice chain should always be striving to increase value for clients which may include things like improving the service provided, carefully managing costs or reducing costs through beneficial methods such as economies of scale or access to better share classes (a good example is that at PortfolioMetrix in Ireland we access share classes that are on average roughly a third cheaper than those accessible to retail investors), but of course costs can also be reduced by certain other less beneficial methods, including providing very basic solutions, cutting corners in the services provided or issuing incomplete fee disclosures!
The fact is if a client wants good quality ongoing advice, utilising secure custody and combined with comprehensive and professional investment management using some of the biggest and best fund managers in the world then this does come at a cost, but this should be more than compensated for by the completeness of the service and the value provided to the end client.
