At Acuvest, we take some pride in being able to state on our website that we are an “Irish owned & independent wealth and investment advisory firm”. From time to time, we’re asked about the meaning and importance of being independent. To summarise at the outset, our independence means that we are not conflicted in any way by relationships with third parties and we act solely in the interests of our clients every time.
Being independent is very important.
Regulation is key
The market for financial advice in Ireland is highly regulated, mainly in the interests of protecting consumers against bad actors. This high level of regulation is a really positive feature of our market, and one that the team at Acuvest welcomes. An important cornerstone of this regulation is ensuring that financial and investment advisory firms don’t make false claims about their services and attributes. In order to use the word “independent” in describing an advice business, the firm must be able to warrant it. If the business receives commission from fund managers, product providers or any other third parties, the regulations consider there to be potential conflicts of interests and the firm cannot describe itself as independent.
If you have a little time on your hands, we challenge you to find more than a handful of financial or investment advisory firms who (can) describe themselves as independent! We’re a tiny proportion of the overall advice market in Ireland…
What do we mean by being conflicted?
One of the key features of being able to call ourselves independent, is that we don’t accept any commissions from third parties. We’re not saying that commission in every instance is bad, as sometimes it is an effective means of remunerating an adviser that works well for both the adviser and the client.
But it does open up opportunities for conflicts of interest. For example, if a provider of financial products wants to promote a certain product range, they can offer to pay higher levels of commission than the norm to financial advisers. Now the adviser is faced with the choice of offering their client this potentially less suitable product for a higher income, or a potentially better alternative product that will result in a financial cost for the adviser.
By Acuvest not accepting commissions, our recommendations are only based on what’s best for the client at the best value for money. We don’t have this financial conflict. We sit on your side of the table, with only your interests in mind, our income unaffected by the product or fund solutions that we recommend. There is a financial cost/implication for Acuvest in not accepting commissions, as from time to time this might be a method of payment that a client prefers. But we believe this is a price worth paying.
How does your adviser describe themselves?
We know that there is a pretty bewildering array of different titles used by people who advise in relation to financial matters. We hear of financial advisers, brokers, financial planners, stockbrokers, investment advisers and the rest! How is an investor supposed to choose who is right for them?
An important question to consider is who they act for. Are they paid solely by fees from clients, acting only in the interest of those clients? Or are they paid commission by product or fund providers with the potential conflicts of interest that can then arise?
When commission is received, as is the case with most financial advice businesses, the adviser is usually a sales agent of the product or fund provider. We’re not saying that these firms don’t act in the best interests of their clients, but the potential conflicts do exist. Some might describe themselves as “fee based”, maybe they charge a fee for the completion of a financial plan. A searching question is though, why they don’t use the term “independent”. This is usually because there is some portion of their business for which commission is payable.
By being independent and only remunerated by fees paid by the client in every instance, these conflicts don’t exist at Acuvest.
Beware of the impact of commissions / fund based charges
Consider the following simple example. If you have €100,000 invested and you are paying 0.75% of this fund in adviser fees each year, the cost is €750 per annum. If your fund increases over time to €200,000, you are then paying €1,450 p.a. in advisor fees. However, if you have €1m invested and you are paying 0.75% of this fund in adviser fees each year, the yearly cost is €7,500. If your fund increases over time to €2m, you pay €14,500 p.a. This is a sizable increase in the annual adviser fee you are paying. There is nothing wrong with charging a fee based on the value of your fund, but you should consider the value of it in Euros, and be happy with what you are paying for. You also should consider if you are receiving sufficient, additional advice benefits to justify these higher fees that you are paying.
The alternative is fixed fees. We agree the scope of the work and the fee (in Euros) that is appropriate for that work and that is crystal clear. At Acuvest, we believe that this works best for investors and Acuvest alike.
As we stated earlier, being independent is very important to Acuvest.