So a new client comes to see you….

(Nick: mid 40’s, has an old Porsche Boxster he drives only at weekends)

Nick is proverbially clutching his very precious £150k, he is wondering if you can help him make it safe and also secure him some great returns on it.

Nick likes you, he’s starting to trust you but it’s a big decision for him so before you see him again he has promised himself he will do a bit of reading and speak to at least one more adviser about what he should be doing.

Let’s say Nick is not a daft man, he’s a middle manager somewhere but he is no financial genius, let’s rank him as “low middle” in terms of your client banks average investment knowledge.

When you next see Nick, unbeknown to you, he has visited a provider sales rep so you are now in competition with another adviser. He did a bit of reading himself but his copy of “money week” just told him to buy Gold and he hasn’t the risk appetite or time to research this properly.

Ever lost a client you were convinced you would get?

This one gets away.

The difference is that now under RDR, it’s not your fault or at least the odds are stacked against you.

The thing that ultimately swung it was that when Nick looks at investing with you his investment (client account) goes from £150k to £147k (or whatever your charges are).

When Nick looks at the provider proposition he puts in £150k and…

HEY PRESTO his client account still shows his precious £150k fully intact!!

You explain that there are exit charges, the AMC is huge and there are other nasties, Nick sort of gets what you’re saying but then the provider rep told him you would say these things.

The rep also told him that there was no real need to pay the extra fees of any independent adviser, why would Nick pay a middle man when you can just buy direct from the manufacturer?

Your advice is logically better, but people don’t buy on logic they buy on emotion.

If Nick goes with you then his pain is immediate and certain (therefore emotionally provoking) with a £3k (or whatever) investment charge straight out of his pot.

Now on the other hand, the pain with the tied advisor option is in the distance and not certain (so not emotionally provoking).

Perhaps you would have been able to convince Nick about the hidden costs and won this client but that’s not the point.

What is the point?

The point is that in this supposedly fair and transparent brand new RDR regime, why should you have to?

I think it’s unfair, what do you think?