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Which? research finds wide variations in advice fees

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Which? has called for advisers to publish a rate guide on their websites in order to help people make an informed decision about choosing an IFA, after research showed large variations in the fees charged.

According to Which?, a survey of 200 advisers showed the average fee quoted to transfer a £10,680 investment into a stocks and shares Isa was £356, but one adviser in the south-east quoted £2,500 while two advisers in the south-west and the east of England quoted £106.

For transferring £5,000 into a stakeholder pension, the cheapest adviser charged £50 whilst the most expensive charged £2,500.

One IFA in the north-west quoted nearly £2,000 more to arrange a protection policy for a 30-year-old female in good health earning £30,000 a year with a retirement age of 65, than an adviser in Scotland quoted to do the same job.

The highest charge in this case was £2,100 and the lowest £120. The average fee quoted was £596.

Of the advisers surveyed, 89 per cent said they offered a free consultation.

Which? chief executive Peter Vicary-Smith says: “Financial advisers should be much more transparent in their pricing, providing details of all their charges upfront. At present it is very difficult for customers to know how much they are going to be charged, and what is reasonable.”

Jacksons Financial Services managing director Pete Matthew says: “I would never provide a quote over the phone because I then get chosen over another adviser on the basis of cost. Clients who obsess too much about the price of everything tend to see the value of nothing.  If the client obsesses too much about the price I am likely to politely point them towards another adviser. I do wonder if some of the more expensive IFAs out there are pricing to avoid just such prospects.”

Brunning Newman Houghton director David Brunning says: “We do not believe a fixed menu of charges is appropriate because each client is different. The figures quoted as the highest are pretty ridiculous but the lowest quotes are also mad, I would dispute that anyone can do a transfer into a stakeholder pension for £50.”

Which? has also put forward a list of questions it believes consumers should ask before choosing an IFA.

They are:

- How will the fees be charged?

- Does the IFA receive commission set by product providers? If so, how will it change this approach post-RDR?

- At what stage of the process will you be charged?

- How will you have to pay the fees, cheque or bank transfer?

- Are different fee options available to you for the service you require?

- What service are you receiving for the fees or commission? Initial or ongoing reviews?

- Will there be any ongoing commission or fees?

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Readers' comments (42)

  • Looks to me like the same question asked 6 times.

    WHICH? should mind its own business since it seems to know nothing about the advice process. If, post RDR, the client still isn't getting enough information on fees then we might as well all pack up and go home.

    Perhaps WHICH ? would spell out its own agenda (stirring up the sh** to sell its highly biased in-depth (ha ha) reports). I have always believed that WHICH receives kick backs from product manufacturers to promote certain companies - perhaps WHICH ? will declare, without obfuscation, that they NEVER EVER receive any form of kick back so the public can be sure that their guidance is not biased.

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  • This seems like a very positive piece of research and can certainly be used to promote the openness and transparency of my own practice. I shall also use this against banks and direct sales etc in the same way.

    I have yet to find anyone who has an issue with knowing the cost of advice at the outset. As long as you have a clear process and service offering (and don't over charge!) then clients seem to be ok with that.

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  • Another pointless bit of research by Which!

    It's a bit like me publishing research saying "IFA research finds wide variation in cost of magazines" and then writing that an IFA has found that magazine printers are selling magazines for differing amounts. The IFA found that some magazines were being given away for free, while others were charging £5.

    What an absolute waste of time, money, and effort!!

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  • This is bound to happen, the way FSA regulates the industry. They could not care less about advisers! The industry is also to blame not being able to have sensible pragmatic regulations and accepting all what is thrown at them by the regulator. If they have made it fees based charging, ofcourse they will differ?

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  • No adviser should be charging less than it costs him in terms of all overheads, demands of the FSA, FOS and FSCS plus an allowance for the risk of retrospectively being judged.

    I very much doubt that could be done cost effectively for £106.

    On the other hand, deliberately pricing oneself out of business one does not wish to accept is a long standing practice.

    It is why many motor insurers charge ridiculously high prices for some risks and it is a technique I have used myself. It is a matter of commercial judgement and, as a boatbuilder I know says - if the customer doesn't want to pay the price they don't have to get you to do the work.

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  • Is it me or are Which barking up completely the wrong tree? Firms can charge what they wish in order to carry out their services; this is common commercial practice.
    Which would be better placed questioning why products and processes are so complex that such advice is required at all. Let me give them a brief insight into why things are as they are..
    The reality is that, the public do not and will not purchase pensions and asset-backed investments in the numbers required to sustain product providers needs, so as a consequence of their complexity, they have to be 'sold' by someone. If product performance had matched customers’ expectations over the years, then we would have a consumer base that would indeed understand and ‘purchase’ such products in sufficient volumes and effectively do the job cheaply for themselves and product providers. However, this is not the case and the much-vaunted alternative of doing nothing and leaving funds on deposit, falls far short of being the correct route for saving for your future is a poor substitute… This is where RDR is taking us, no doubt about that!
    So...and here's the rub...until product providers find a way of being able to successfully encourage people to ‘buy’ their products (and God knows they have tried and failed enough times!). Then advisers are needed and whether for 'selling' such products (nothing wrong with that if it fits the needs of the client!) or advising people on maturing pensions/investments, they should be paid and paid well enough to feed themselves as well as the industry's lazy parasites who, in their inability to face their public, prefer to survive on the back of advisers endeavours (and you all know who you are).
    So, the issue is not what the adviser charges, but what the adviser is charged and perhaps Which would be better focusing their attention on this area, rather than berating advisers for doing their job (and that of so many others in the process!).

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  • Its about time that IFA's valued their years of experience and training. Don't undersell yourselves. The public undervalues the service offered so don't give it away. £106 for this advice? That's a disgrace.

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  • If Which are going to present price comparisons, at least undertake them in a mature way. Quite honestly, if a new client came to me for advice about transferring a £5,000 stakeholder pension, I too would “price to avoid”.

    In the same way that if I was in the process of buying a 1 bedroom investment property for £30,000, I would not go to a London City law firm to ask for a quotation.

    RDR is not just about the new world of fees against commission. It’s about a service proposition/offering from advisor to client.

    It’s a real shame that Which didn’t highlight what the advisors/firms were offering for the fee being quoted.

    Why do Which always insist on only showing bottom of the barrel business, instead of comparing a more realistic size of business.

    A very interesting and timely subject matter, presented with the usual out of touch manner by Which.

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  • YOU pushed for RDR and fee based charging and you got it. Different businesses charge differing prices (called competition). You shop in supermarkets and pay the price asked - no cartels here? Solicitors, accountants et al charge differing fees, so why stick your noses in here. You got RDR, so live with it. Remember when your 'consumers' are paying over the odds or getting ripped off by the banks, you pressed for it instead of a standard commission charge . WHICH = IDIOTS!

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  • Indicative fees on the websites is a good things. It is good for clients to make an informend decision before they call an IFA.

    At the end of the day, we need to have similar prices, as solicitors & accountants do.

    For bespoke work there is another mather, but for simpler things like a £10,000 annual pension contribution we need to have uncovered fees.

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