I used to visit the local offices of a large wealth management firm, you discuss mutual clients. The building itself was mothing to look at and it stood next to a roundabout on a busy A road. Once inside however you could have been in Mayfair, London.
The carpets were the first thing you noticed as you stepped out of the lift. They were on the same level as the floor of the lift but you felt as though you sunk an extra half a foot into the luxurious carpet pile. The décor was elegant and the meeting rooms had almost floor to ceiling, gorgeously thick curtains The aural effect was extraordinary, all of the soft furnishings completely suppressed the sounds from outside and made even the inside conversations feel quieter, softer, gentler.
Their wealth management services were expensive and underperformed the market. You could buy much better portfolio returns at a tenth of the cost. Even worse was the fact that they only provided investment management and no advice.
The problem with the traditional wealth management industry is that the thing they charge so much for is the one area where they can’t add value. They overcharge in the one area where economics shows they can’t outperform, competing with global markets.
If they offered advice it would be a different argument. Advice to reduce tax or plan your saving/expenditure to make sure that you have enough to enjoy life now and in the future, is hugely valuable.
It gets worse.
These traditional wealth management companies exclusively charge on a percentage of wealth basis. This means that advice to reduce tax (particularly inheritance tax) involves giving money away. These managers have a strong incentive to not talk about giving money away, as it also gives away their income.
If you want to speak a firm who can advise you on tax and cashflow planning as well as breaking the bad financial incentives of the wealth management profession, choose one of the flat fee firms on our home page and contact us to be put in touch.