Industry responses have been somewhat lukewarm to the proposal of the cap on fees by the government, and it’s no wonder. Exit fees have done an incredible job of making money for these firms with very little effort on their part. Like any addictive substance, this easy money will be a struggle for these firms to wean themselves off.
The cap on fees announced by the UK government is a step in the right direction, but why stop there? Financial advisers should be required to be upfront and explicit about all of their fees, but particularly initial commissions received and early exit fees. There is absolutely no good reason for this to not be the case.
When asked direct questions about commissions and management fees by clients advisers shouldn’t respond with vague mumbo jumbo. It’s a clear warning sign. Clients should always be aware of exactly what they are paying for and how much, and advisers should be able to spell it out clearly and succinctly. And if clients are not happy with the advice and service they should be able to move their investment or pension to another adviser without penalty.
Transparency is nothing for financial institutions to be afraid of as it instils trust in their firm and the financial industry as a whole. Greater trust sets the tone for financial firms to have better and more lasting relationships with their customers. Transparency is just good business, plain and simple.
The Treasury’s proposal for a cap on early exit fees is just one more step forward and the entire financial industry should embrace it.
