What’s better than an estate agent at the bottom of a swimming pool? Two estate agents at the bottom of a swimming pool. Or so the old joke goes.
This sprang to mind recently when one such agent charged me 1% of the value of my property for managing its sale. The market is booming, I thought. How much is this guy really going to have to do to earn that 1%? Am I getting value for money? Indignation set in.
And then, once I’d had a proper think, I figured yes, he did have to work hard. Not just for me on this one occasion, but to build up the considerable expertise that fed into my decision to charge a ridiculously high price for the property. Having achieved very close to that mark, his fee begins to look more reasonable.
And then I think of all the times he had to intercede to chivvy me and my buyer along and navigate our rather volatile moods and perceptions of market value. All of this requires a skilled tactitioner with in-depth knowledge of this particular market, what moves it, whose buying, whose selling etc.
He sprung to mind again at the NAPF conference, of all places, where I was listening to a distinguished panel of consultants, fund managers and investors debate the value proposition of investment agents.
Oddly enough, both experiences brought me to one over-riding conclusion: the value of agency services is very much in the eye of the beholder.
Unfortunately, that eye can be massively prejudiced as a result of misbehaviour in only a few cases, even though, on the whole, those agents are providing good value for money. Transition management, much like estate agents, is a clear example of this conundrum.
The fine imposed on State Street by the Financial Conduct Authority (FCA) for overcharging transition clients, and the Thematic Review sparked by those events, have tarnished the whole industry with the same brush.
Yet, there is a lot of value out there. Ask the FCA and you’ll hear that overall transition management is positive and there is genuine desire among providers to do the right thing.
There is, however, work to be done on both sides: firstly, providers must clean up their act, work harder to provide transparency and make their value clear; secondly, investors must recognise the need to start asking more penetrating questions. If an investment bank is offering little or no explicit transition management fee, it stands to reason they will be making money elsewhere. As with so much in life, there is no free lunch and you get what you pay for.
That’s not to say funds burnt by overcharging have only themselves to blame. That’s not the case at all. As in any occasion where there is asymmetry of information between client and provider, trust and the perception of value are inextricably linked. Where a trusted provider is found wanting, the fall is inevitably hard and often more broad-reaching. At the industry level, trust is the collateral damage resulting from the State Street debacle.
Most importantly for transition management, as with any other agency service, trust must be earned, but it cannot be blind.
Do I trust my estate agent enough to recommend him – absolutely. Do I think he’s good value for money? Depends what mood you catch me in.
Emma Cusworth is a freelance journalist and regular contributor to portfolio institutional
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