The Investors Chronicle recently claimed that under a new financial advice regime called the Retail Distribution Review (RDR), advisers across the UK will be “preparing to dump their unprofitable clients“ from January onwards. Julian Parrott, partner at Ethical Futures, explains what this means for ethical investors in the first of two professional perspectives published today.
Some advisers have a rather overinflated sense of their own worth – either that, or they are running expensive offices and cars!
Undoubtedly there will be collateral damage in terms of client outcomes as a result of RDR but at Ethical Futures, we like to think of ourselves as advising clients from all walks of life and economic backgrounds.
I’m aware of a number of firms (even in the specialist ethical field) that won’t entertain you unless you have a £100,000 of investable wealth. Firms are entitled to set out their stall in a way that suits them best, but much like the growth in term ‘Wealth Manager’ – which often just means the adviser has put together a model portfolio – I’m not very happy with this self-aggrandisement.
That said, the RDR changes are making advisers look at business costs more closely and when you consider the compliance cost and admin cost of putting together a basic recommendation, then it’s quite surprising what it actually costs to engage with a client.
We have carried out a detailed assessment of our costs and have put together a range of service offerings for our typical clients. On the basis of costs established – it’s unlikely that we can really advise a client for less than a £300-350 initial advice cost. Ongoing service will depend on requirements but will probably be at that level or higher as well.
This issue was brought into sharp focus when I recently had a request from a woman who worked for a voluntary organisation. Her employers were keen to start making their 6% of salary contractual pension payment to her before the year end. We had a meeting, looked at her situation and quickly established that she had no scope or resources for other planning issues and that a stakeholder pension was the best answer.
In the past, we have done these on good will and they would pay us commission. Closer inspection revealed that the appropriate plan would pay Ethical Futures the princely sum of £5.87 for advice in the first year and a recurrence thereafter if the plan stayed active. In the end, I waived my fee and asked the client for a modest contribution to administration costs. Clearly this end of the market is not going to be able to continue to get IFA advice, unless we decide to do pro bono days.
This is a shame, an unintended consequence of RDR and for the ethical investor, a double whammy, because they won’t get an ethical solution from most banks.
I think the key issue is in terms of positioning our costs – so long as client understands what advice and planning is about and what it actually costs to deliver then I think RDR provides a big opportunity. At Ethical Futures, we remain open for business to all comers.
Julian Parrott is chair of the Ethical Investment Association (EIA) and a partner at Ethical Futures, financial advisers based in Edinburgh.
A Good Look At How Homes Will Become More Energy Efficient Soon
Everyone always talks about ways they can save energy at home, but the tactics are old school. They’re only tweaking the way they do things at the moment. Sealing holes in your home isn’t exactly the next scientific breakthrough we’ve been waiting for.
There is some good news because technology is progressing quickly. Some tactics might not be brand new, but they’re becoming more popular. Here are a few things you should expect to see in homes all around the country within a few years.
1. The Rise Of Smart Windows
When you look at a window right now it’s just a pane of glass. In the future they’ll be controlled by microprocessors and sensors. They’ll change depending on the specific weather conditions directly outside.
If the sun disappears the shade will automatically adjust to let in more light. The exact opposite will happen when it’s sunny. These energy efficient windows will save everyone a huge amount of money.
2. A Better Way To Cool Roofs
If you wanted to cool a roof down today you would coat it with a material full of specialized pigments. This would allow roofs to deflect the sun and they’d absorb less heat in the process too.
Soon we’ll see the same thing being done, but it will be four times more effective. Roofs will never get too hot again. Anyone with a large roof is going to see a sharp decrease in their energy bills.
3. Low-E Windows Taking Over
It’s a mystery why these aren’t already extremely popular, but things are starting to change. Read low-E window replacement reviews and you’ll see everyone loves them because they’re extremely effective.
They’ll keep heat outside in summer or inside in winter. People don’t even have to buy new windows to enjoy the technology. All they’ll need is a low-E film to place over their current ones.
4. Magnets Will Cool Fridges
Refrigerators haven’t changed much in a very long time. They’re still using a vapor compression process that wastes energy while harming the environment. It won’t be long until they’ll be cooled using magnets instead.
The magnetocaloric effect is going to revolutionize cold food storage. The fluid these fridges are going to use will be water-based, which means the environment can rest easy and energy bills will drop.
5. Improving Our Current LEDs
Everyone who spent a lot of money on energy must have been very happy when LEDs became mainstream. Incandescent light bulbs belong in museums today because the new tech cut costs by up to 85 percent.
That doesn’t mean someone isn’t always trying to improve on an already great invention. The amount of lumens LEDs produce per watt isn’t great, but we’ve already found a way to increase it by 25 percent.
Maybe Homes Will Look Different Too
Do you think we’ll come up with new styles of homes that will take off? Surely it’s not out of the question. Everything inside homes seems to be changing for the better with each passing year. It’s going to continue doing so thanks to amazing inventors.
ShutterStock – Stock photo ID: 613912244
IEMA Urge Government’s Industrial Strategy Skills Overhaul To Adopt A “Long View Approach”
IEMA, in response to the launch of the Government’s Industrial Strategy Green Paper, have welcomed the focus on technical skills and education to boost “competence and capability” of tomorrow’s workforce.
Policy experts at the world’s leading professional association of Environment and Sustainability professionals has today welcomed Prime Minister Teresa May’s confirmation that an overhaul of technical education and skills will form a central part of the Plan for Britain – but warns the strategy must be one for the long term.
Martin Baxter, Chief Policy Advisor at IEMA said this morning that the approach and predicted investment in building a stronger technical skills portfolio to boost the UK’s productivity and economic resilience is positive, and presents an opportunity to drive the UK’s skills profile and commitment to sustainability outside of the EU.
Commenting on the launch of the Government’s Industrial Strategy Green Paper, Baxter said today:
“Government must use the Industrial Strategy as an opportunity to accelerate the UK’s transition to a low-carbon, resource efficient economy – one that is flexible and agile and which gives a progressive outlook for the UK’s future outside the EU.
We welcome the focus on skills and education, as it is vital that tomorrow’s workforce has the competence and capability to innovate and compete globally in high-value manufacturing and leading technology.
There is a real opportunity with the Industrial Strategy, and forthcoming 25 year Environment Plan and Carbon Emissions Reduction Plan, to set long-term economic and environmental outcomes which set the conditions to unlock investment, enhance natural capital and provide employment and export opportunities for UK business.
We will ensure that the Environment and Sustainability profession makes a positive contribution in responding to the Green Paper.”