"It's unwise to pay too much, but it's worse to pay too little. ... When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot — it can't be done"
John Ruskin
This has nothing to do with the size of the account or if the whole account is invested in a single index fund.
An ARF is an extremely complex structure (hence my point that there should be a statutory requirement to appoint an adviser) and the main reason for this is that where the owner has lost mental capacity there needs to be someone competent to step in and act in the best interests of the retiree who would be completely incapable of making any decisions. Its not about whether or not you can make decisions today. You aren't taking out an ARF for a year, you are taking it out for the whole of the rest of your life and you will get older each year and require more assistance at precisely the time that the value of your account is almost certainly worth less than it is today.
I have a client who literally has no family who can step into this role before anyone says that a power of attorney to a child solves it. Not everyone has children and even then not everyone wants to put this "burden" onto their family.
I'm also going to dismiss out of court the suggested cost of meeting an adviser for an hour a year as neither adequate, appropriate or commercially realistic
I'd like to see where anyone can find an adviser who can run a regulated business and charge their clients €150 to €200 once a year
Annual Meeting
Meeting room cost (let's say a serviced office which charges from €50 to €100 per hour) or maybe we will just hang around a hotel lobby while discussing your personal confidential details?
Travel costs to meeting ( maybe I'll walk into town?)
Staff Costs (advisers salary? what about support staff?)
Regulatory levies - includes the cost of contribution to the investor compensation scheme
Continuing Professional Development - all advisers in Ireland are required to complete a minimum of 15 hours a year of CPD. A good CPD event costs €100 or €200 to attend or I can save some money going to "free" events which are sponsored by product producers - I wonder if that might result in less objective advice??? However, for full disclosure I have an additional 70 hours on top of the minimum due to the additional professional designations I hold.
Professional Indemnity Insurance a legal requirement. I've just renewed my PI policy €6562.50 including 5% levy so that's 32 one hour meetings at €200 an hour just to pay for my Insurance. So I'd need at least 32 clients just to pay for Professional Indemnity premium so I'm going to need a lot of clients which leads onto
Marketing costs - how much do I need to spent on marketing my services?
Update Anti Money Laundering Documentation a legal requirement - could use a smart phone for this but monthly contract required
Update Know your customer data a regulatory requirement - do we do this in the meeting? Doesn't leave much time to talk about the ARF does it?
Obtain valuation statement (since you are not paying for an ongoing service) do you bring the statement and I read it really quickly or do I phone the ARF provider beforehand and spend an hour of my time on hold listening to the Fields of Athenry?
And then the big question: are you paying for an hour of my time or my experience and credentials? Are you really sure that you want advice on your life savings from a newly qualified inexperienced adviser who is willing to give you their time for free?
It's not the fault of advisers that they have to charge to provide a regulated service in Ireland
So, in summary the cost to provide an insured, regulated Professional Service in Ireland for a €335,000 ARF
Example for illustrative purposes only
Marc Westlake CFP
®, TEP, APFS, EFP ,QFA
CHARTERED, CERTIFIED & EUROPEAN FINANCIAL PLANNER™ professional
AND REGISTERED TRUST & ESTATE PRACTITIONER
