The What Price Advice report from AFH Wealth Management warns that “in particular investors do not understand platform fees and their impact”
AFH, which announced in 2018 that it would absorb platform fees for clients, asked investors who have accessed financial advice how much a 0.3% platform charge would cost on a £50,000 investment over 25 years. On average, investors estimated platform fees would cost £7,400, undervaluing the true £12,500 cost by over £5,000.
AFH says the figures suggest a “clear knowledge gap among investors.”
Two in five (41%) of investors admitted they did not know the impact of platform fees on their investments with 27% aware of the fees but not sure how they affected their investments and one in eight (13%) unaware of the fees they were paying “at all.”
AFH believes that to bridge this knowledge gap the industry should play a greater role in educating clients about platform fees and their significant compound impact over the long term.
It says this view is supported by advisers with the majority (70%) of advisers believing there needs to be more transparency on costs and charges.
Alan Hudson, CEO, AFH Wealth Management, said: “Investors are baffled by the charges they face, and the impact they have on returns. Platform fees, for instance, have the potential to cost thousands of pounds which could delay a person’s retirement goals or stop them supporting younger generations onto the housing ladder.
“Advisers and advisory firms, must be ready and willing to disclose fees, be that platform fees or ongoing advice fees and importantly, outline their impact over the long term through the power of compounding. Only through a greater drive for transparency will the industry be able to show value for money, and ultimately improve widespread trust.”
Opinium carried out two online surveys on behalf of AFH in November 2018. The adviser research surveyed 221 financial advisers in the UK and investor research surveyed 1,026 UK adults with over £100,000 in personal savings who have seen a financial adviser.
AIM-listed AFH employs more than 200 advisers and planners across the UK and has 12 offices and £5.4 billion in assets under management.