Redefining Wealth Management
“The biggest disappointment of my time at the FSA has been the failure of firms, and particularly their senior management, to learn the lessons of past mis-selling. Sadly, the recent history of the British retail financial services industry is proof of the adage that those who fail to understand the mistakes of the past are condemned to repeat them. Though the pensions mis-selling debacle, which cost the industry over £11 billion in compensation, should have been a stark lesson of the dangers of uncontrolled and unsuitable selling, it is hard to see evidence that that lesson has been widely understood. Again and again we find examples of High Street firms disregarding the suitability requirements in our rulebook. Requirements which merely, in my view, describe what most service companies would regard as good customer service.
Unfortunately, much of the industry remains focused on short-term gain from shifting product. Indeed many firms are happy to see themselves described as "product providers", terminology which in itself distances them from their customers, many of whom assume that they are being given advice which takes their personal circumstances into account and who see their relationship with their bank or life insurance company as one for the long term and not solely transaction-based.”
-Sir Howard Davies former chairman on the Financial Services Authority in the UK.
We are struck by the rise in the number of firms in Ireland now offering “Wealth Management”, only to find they seem to be pushing the same old transactional services, under a new label.
We also sense a new wave of disenchantment on the part of clients, which is perhaps a sad but inevitable byproduct of the shifting landscape within the retail advice sector as more firms hitch themselves to the bandwagon without first looking at some fairly fundamental issues.
Our approach to Wealth Management isn’t about being better at the job than other firms or advisers and it certainly isn’t part of a moral crusade to change the world. It is simply a different way of doing business.
Impartial advice not transactional sales
So, if you are looking for impartial Financial Advice, how can you be sure that you will receive it? Most Advisory Firms have an infrastructure to handle transactional solutions for clients.
Typically, the packaged, off-the-shelf solutions from a product provider are sold, following research and chased through the process to completion, with delivery of the policy documents and receipt of the commission as the end objective.
This is the dominant business model in Ireland so let’s consider some regulatory comment on the subject:
“Consumers rely heavily on advice from intermediaries, although they have almost no understanding of the costs of obtaining this, and are unable to gauge its quality. Moreover the advice itself is often compromised by the incentive effects of commission paid by product providers.“ ‘Sandler” review into medium and long-term savings July 2002
“The present distribution system is distinguished by a focus on business volume rather than quality.”
“Consumers are not always advised on transactions which fail to remunerate the adviser, or which offer little by way of commission to the adviser.”
“I am struck by the prevalence of examples of providers managing demand – up or down– by adjusting commissions which can lead to less suitable or even unsuitable sales.”
Quotes from the Gleneagles Savings & Pensions Industry Leaders’ summit in September 2006
The bottom line is that commission-based advisers get paid a different amount depending on the course of action they recommend to their client. They then get paid a different amount depending on the type of product they suggest and even the actual product provider they select as being the most appropriate.
With this system, where the client wants the best advice yet the adviser could be paid significantly more for providing inappropriate recommendations, there is inevitably a conflict of interest between the client and the adviser.
Commissions are an inducement to sell products and the bigger the commission the bigger the inducement.
The conflict of interest this creates would be obvious to most consumers, which is perhaps why too many financial advisers disguise their charging structures.
Fee only advice
To have confidence in any advice or recommendations being given by a financial adviser, the client must know that the adviser is acting solely in their best interests and does not have a financial incentive to recommend a course of action that is not the most appropriate.
This can only be done on a transparent fee basis, where the client understands and agrees at outset on the level of charges and these charges are not dependent on the sale of a product.
We offer a fee-only wealth management, financial planning and consultancy service.
No third-party commissions.
This is the approach adopted by other professional services organisations and ensures that advice cannot be influenced by different levels of remuneration which inherently create an advice bias. If commissions are generated, as a result of our advice, these belong to the client and, where possible, are either reinvested or rebated back to them. With a transparent fee-based approach, and no potential conflicts of interest, clients can be sure that any recommendations are made purely in their best interests.
Making promises is not only easy but unfortunately endemic in Financial Services. What isn’t endemic is having the systems, the processes and the intellectual capital to deliver on the promises.
Any serious Advisory Firm MUST have as its primary relationship, the client. Not a series of product providers.
By that we mean that every client has to have an engagement letter in place that specifies the service levels and remuneration structure. The client should always be aware that the service has to be paid for and that no advice can be given without that agreement in place. If as a result of the work, commission is generated, it can be offset against the fee.
GoldCore Wealth Management Solution
In the light of current market conditions, the demand for a specialist introduction service for complex advice is growing. Increasingly, brokers are recognising the commercial logic of having specialists in this area to call on - this is where GoldCore Wealth Management can help you and your clients.
Our consultancy services draw on nearly 20 years of providing Wealth Management Services in the UK on a fee-only basis to high net worth clients.
Our investment management services draw upon the principles of modern portfolio theory and through our unique associations with major international fund management companies, we are able to offer your clients access to some of the most cost effective investment funds available anywhere in the world.
GoldCore Wealth Management offer a non-compete agreement whereby the introducing broker retains the client relationship and we offer a suit of “Virtual Family Office Services” tailored to meet the your requirements and those of your clients.
GoldCore Wealth Management is regulated by the Central Bank of Ireland to operate as a Master Broker.
Summary of services
• Financial Adviser consultancy
• Fundamentals of investment training
• Lifetime cash flow planning using “Monte Carlo” Simulations
• Analysis of existing portfolio of investment funds
• Portfolio Management*
• Risk Profiling
• Investment portfolio recommendations
• Tax consultancy
• Pensioneer Trustee Services
• Bespoke Professional Pension product for sole-traders and partnerships
• Other services by mutual agreement
*Note: This is not a Discretionary Management Service as defined by the MiFID regulations.
Please contact us for more information
Tel 01 632 5010
e mail wealth@goldcore.com