The Comfortable Lie of Bundling Advice and Product

There’s a silent deception happening in the financial advice industry—one that blends the lines between advice and product sales. This is where advisers, who double as product distributors, create what they call “adviser alpha.” The supposed value they claim to add often revolves around investment management. Yet, retail investment management has long been commoditised, with low-cost, well-diversified investments readily available to the public. The debate between index funds and active management has been settled in favour of passive strategies, so the real value no longer comes from the products themselves.

But here’s where the uncomfortable truth lies. When advisers say, “I add so much value through investment management that even after my extra services, which I provide for free, you’re still better off,” it’s a smokescreen. The true message should be, “I add value through advice, not through investment management, but I take charges from your portfolio for my benefit.” It’s a shadowy practice that often leaves clients feeling bullied, ignored, or scared to ask questions.

This experience is all too common, as demonstrated in a recent case study. I met with a client who was dealing with high investment fees—2% annually on a protected trust of ￡270,000. We explored low-cost investment solutions and considered dissolving the trust altogether, given that the client was the sole beneficiary. The trustees were advised to investigate lower-cost alternatives, and we prepared questions to ask their financial adviser and solicitor.

The questions ranged from understanding the fees being charged, to exploring the potential benefits of switching to index funds, and even discussing the trust’s dissolution. The client took these questions to their financial planner and solicitor, only to be met with defensiveness, a refusal to answer, and vague responses. The adviser seemed “quite put out” by the notion of the client having sought a second opinion.

Dear Steve,

This is a telling example of why bundling advice and product should not continue. Clients deserve transparency, clarity, and the ability to understand the services they are paying for. When advisers refuse to answer basic questions or become defensive, it indicates a deeper problem—one rooted in maintaining control rather than empowering clients.

By separating advice from product, you ensure that the advice remains unbiased and focused solely on the client’s best interests. You are free to explore low-cost, effective investment options and align your financial strategy with your goals. At the Academy of Life Planning, we believe in empowering individuals through transparency and self-directed financial planning. You deserve advice that genuinely adds value, and not just fees that serve the adviser’s interests.

Next Steps: Questions to Ask

For anyone in a similar situation, I recommend preparing a set of questions that focus on transparency, value, and alignment with your goals. By asking the right questions, you can regain control over your financial decisions. And, if your adviser is unwilling to engage openly, it may be time to rethink that relationship.

It’s time to demand clarity, transparency, and advice that aligns with your life goals. Whether you’re managing a trust or planning your financial future, never feel intimidated to ask the hard questions.

These were the questions designed to empower the client to take control of their financial planning, gain clarity on fees, and explore options for better aligning their strategy with their goals.

Questions for the Investment Manager:

Understanding the Fees:

• “The annual management fee of 2% on ￡270,000 means I’m paying ￡5,400 each year. Can you break down exactly what services and value I’m receiving for this fee?”
• “How does your investment strategy compare with low-cost index funds? What additional benefits do I get that justify the higher fees?”
• “Are there opportunities to reduce these fees while still maintaining a strong, long-term investment strategy?”

Exploring Index Funds:

• “I’ve been looking into index funds, which come at a fraction of the cost. Could we explore ways to integrate more index funds into the trust’s strategy to reduce overall costs?”
• “What are the risks and benefits of switching from an actively managed portfolio to one that focuses more on low-cost index funds?”

Performance and Reporting:

• “Can you provide a performance comparison between your managed portfolio and relevant benchmarks or index funds over the last few years?”
• “What specific metrics should I be looking at to assess whether the current management strategy is delivering good value for me?”

Questions for the Solicitor:

Trust Administration Costs:

• “In addition to the investment management fees, I’m also paying for trust administration. Could you clarify exactly what services are included in these fees?”
• “Is there a way to streamline or consolidate these costs? Are there any opportunities to negotiate lower fees?”

Exploring the Option to Dissolve the Trust:

• “With the trust costing over ￡10,000 per year to run, I’m considering dissolving it. Could you walk me through the full process and legal implications of doing this?”
• “What are the potential tax consequences of dissolving the trust, and how might they affect me financially?”
• “Are there any situations where dissolving the trust might not be advisable, even if it appears to be more cost-effective?”

Long-Term Financial Implications:

• “Could you help me compare the long-term financial implications of continuing to run the trust versus dissolving it? What are the pros and cons of each option?”
• “If I decide to keep the trust running, are there strategies you would recommend to reduce ongoing costs or improve the efficiency of how it’s managed?”

General Questions for Both the Investment Manager and Solicitor:

Aligning on Goals:

• “How well do the current investment strategy and trust administration align with my overall financial goals? Is there anything we should reconsider to better suit my needs?”
• “Could we schedule regular reviews to assess whether the current approach remains in my best interest moving forward?”

Transparency and Communication:

• “I want to ensure I’m fully informed and comfortable with all decisions going forward. How can we improve transparency and communication regarding both the costs and the performance of the trust?”

Questions & Answers

Q: Why is it important to separate financial advice from product sales?

A: When financial advice is bundled with product sales, there can be a conflict of interest. The adviser may be incentivised to recommend products that benefit them more than you. By separating advice from product sales, you ensure the advice is unbiased and truly tailored to your needs. This leads to more transparency, allowing you to make better-informed decisions that align with your goals, rather than feeling pressured into costly, unnecessary products.

Q: How can I recognise if I’m paying too much in fees?

A: A good place to start is by asking your financial adviser to clearly explain the value they are providing for the fees you’re paying. Compare their performance to lower-cost options, such as index funds. If you’re being charged a significant percentage of your assets under management, it’s essential to understand exactly what services you’re receiving in return. If the value is unclear, it may be time to explore alternative, cost-effective solutions.

Q: What questions should I ask my financial adviser to ensure I’m getting value for money?

A: It’s crucial to ask direct questions that provide clarity. For example:

• “What specific value and services are you providing for the fees I’m paying?”
• “How does your strategy compare to lower-cost index funds?”
• “Are there ways to reduce fees while maintaining a solid investment strategy?” Asking these questions will give you a better understanding of what you’re paying for and whether it aligns with your financial goals.

Q: What should I do if my adviser refuses to answer my questions?

A: If your adviser is unwilling to be transparent or gets defensive when you ask questions, it’s a red flag. You have the right to fully understand your investments and the fees you’re paying. If your adviser refuses to engage openly, it might be time to consider switching to someone who values transparency and empowers you to make informed decisions.

Q: What are the benefits of exploring low-cost investment solutions?

A: Low-cost investments, like index funds, offer a simple and effective way to grow your money without the high fees associated with actively managed portfolios. They’re often well-diversified and require minimal monitoring. By choosing low-cost solutions, you can reduce fees while still achieving long-term financial growth, giving you more control and peace of mind.

Q: How can I feel more empowered in managing my financial future?

A: Empowerment comes from understanding your financial situation and having access to clear, unbiased advice. Take the time to ask questions, review your options, and make sure your financial strategy aligns with your goals. By being proactive and seeking transparency, you can take control of your financial future with confidence. At the Academy of Life Planning, we focus on helping individuals become self-directed in their financial planning, ensuring you feel supported every step of the way.

Q: What’s the next step if I’m unhappy with my current adviser or investment strategy?

A: If you’re not happy with your current adviser or feel uncertain about your investment strategy, the first step is to review your options. Consider seeking a second opinion or exploring alternative solutions like low-cost investments. The key is to find an adviser or service that prioritises your financial well-being and provides clear, transparent advice. At the Academy, we offer guidance and support to help you take back control and make decisions that align with your life goals.

These Q&As are designed to encourage readers to think critically about their financial planning while feeling supported and motivated to take action.