Public reject paying fees for advice
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Only 3 per cent of consumers would be prepared to pay over £100 per hour for independent advice and half would not pay any fee, according to Aviva research.
An ICM poll of 2,053 consumers conducted for Aviva shows that 50 per cent of people would refuse to pay anything for independent advice and would rather not receive advice at all.
Seventeen per cent say they would be willing to pay less than £25 per hour. Less than 3 per cent say they would be prepared to pay anything over £100 per hour for independent advice.
Average rates for giving independent financial advice usually range from between £75 to £250 an hour.
Aviva director of distribution development Stephen Gay says the research shows that the nature and value of advice is not well understood or appreciated by customers.
He says: “The challenge for our industry is to explain and market the diverse range of services that comprise advice and their benefits to customers.
“It is not that customers will not pay for advice, it is just that they will not pay unless they perceive value.
“IFAs provide an excellent service to the public and those who will thrive after the RDR will be the ones that are best able to describe and
market their advice proposition.”
Facts & Figures managing director Simon Webster says: “This research demonstrates that many people will be ruled out of the advice market because the FSA is forcing the industry to go down a path that it does not want to go down.
“The issue is not that advisers will be in trouble because consumers will not pay fees because the good IFAs will be able to charge for their work. It is about consumers who will not be able to get advice and will be pushed into the hands of the banks.”
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Readers' comments (72)
Sean | 21 Jan 2010 8:39 am
This backs up everything that the industry has been saying but the FSA refuses to believe. The FSA claims it has done research but if the questions were leading enough they could acheive the answers they wanted. Once again big brother meddling is going to cost the public - Pension Transers (yes it was the Government at the time that encouraged people to leave occ schemes), Stakeholder Pensions (soon to be called NEST) that people cant afford and will lose out on mean tested benefits and RDR which will drive people into Banks (and we all know what their record is like).
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Chris | 21 Jan 2010 9:00 am
I wonder what those same people would say if they knew they were already paying more than that in expenses used to fund commissions? (I appreciate that I am assuming the providers will compete those expenses out of the product when factory gate pricing comes in.)
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Martin Bamford | 21 Jan 2010 9:41 am
“It is not that customers will not pay for advice, it is just that they will not pay unless they perceive value."
This is the only statement that really matters from this article. Ignore the headline, ignore the findings, focus on this statement.
Clients will pay fees for advice, if they perceive sufficient value. If they don't perceive value, they will not pay fees.
As Chris says in the previous comment, these people are already paying for advice and in many cases they do not realise just how much they are paying (in both monetary terms and through lack of impartiality).
An IFA who does not have a strong enough value proposition will fail when they try to charge fees for advice.
If your proposition is something like "I'm an IFA and I select the best products/funds/widgets from the whole of the market" then I agree - your clients will not pay you fees.
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Ian | 21 Jan 2010 10:02 am
Agree with Sean, it was always obvious, the public do not pay huge hourly rates for anything but solicitors and the low wage earners get assistance with those.
Regulation and the compensation culture has made our hourly rates sky high and the hours we can actually spend client facing at an all time low.
With no equivalent to Legal Aid for the financial industry it was obvious all along, but not so clear to a regulator which has an average wage of £56,000 and fits in the income group which benefits most from the RDR.
It also never ceases to amaze me how a regulator which costs £437.7m to operate and has around 2,800 staff, which equates to around £156,321 overheads per member of staff per year (incl salary), expects an advice firm to run on peanuts, maybe we could take them more seriously if they led by example?
If they were charging per hour for every member of staff on the amount of hours it is posssible for an IFA to be sat in front of a client their charges would be higher than the highest IFAs listed above, and that is assuming every single member of them was client facing.
But of course many of those FSA staff are admin and receptionists, PAs etc and will be behind the scenes so charges would be much higher.
If anyone should know the cost of overheads it should be the FSA.
Situated in some of the most expensive offices in the country amongst very succesful industry leaders has gone to their heads and they are incapable of connecting to the average income public.
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John Blackmore | 21 Jan 2010 10:02 am
“It is not that customers will not pay for advice, it is just that they will not pay unless they perceive value."
@Martin - I agree entirely. The problem for the Industry/Profession is that the public are probably right - very often they do not get value for money.
The move from commission to fee will not solve this problem - in fact it may make it worse. Already Advisers have a tendency to "activity for its own sake" - doing completely unnecessary work in-order to justify charges. Fee charging may simply make this worse.
My best guesses for post RDR -
1) a significant reduction in the number of "Advisers"
2) a very small minority moving up to the truly
complex world of advice - Q level 6 minimum with very high fees
3) an explosion of direct to provider business for very simply products - ISA no initial charge, 1% pa max Multi- Asset - no advice asked for , needed nor given.
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Anonymous | 21 Jan 2010 10:06 am
IFA'S will be finished. Banks and supermarkets will win hands down. I was at bank yesterday and girl at counter said would i like one of the guaranteed stock market bonds, their are brilliant to boost your interest. Time for a career change and the fsa can stick their RDR where the sun does'nt shine.
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Anonymous | 21 Jan 2010 10:31 am
2053 is a very small sample pool, I know plenty of firms who have more clients than that so I'm not sure that this is a very conclusive report.
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Derek Gair | 21 Jan 2010 10:37 am
Surprise surprise - thats pure genius - a muppet could have worked that out.
The savings/pension/protection gaps aint getting closed anytime soon.
This really is like groundhog day !!!
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Ian | 21 Jan 2010 10:44 am
Re Martin Bamford and John Blackmore, it is precisely comments like those which have got us in to this mess to begin with, sweeping statements with no statistics or evidence to prove or disprove.
When challenged one upheld complaint case is held up as an example, or a comment from an adviser who saw a piece of advice once from.....
I imagine that the vast majority of case sizes are in the value range of £100 to around £450, involve two or three visits from the adviser, so quite where the 'poor value for money' statements are based upon I do not know.
Made up on the spot the same as the FSAs industry problems.
Now 1 million bank advice complaints that is a figure which is based on reality and nothing being done, just attention diverted to the RDR which addresses nothing.
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Anonymous | 21 Jan 2010 10:44 am
There's a surprise! Advisers who have been doing the job right for some time voiced their concerns long ago. My understanding was the Government were wanting to encourage the public to save for their retirement, save for that rainy day and implement insurances to protect themselves and family in the event of illness, death etc and what do we have - a government who has automaticlly excluded over 90% of the public from proper advise! Why do they think the majority of the public don't have a WILL - because they don't want to pay for it. The Government want the public to go the Banks as do the EU. Definately a conflict of interest here!
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