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80% Of income from initial commission

Nearly 80 per cent of adviser turnover still comes from initial commission, with only 5 per cent coming from fees, according to research from True Potential.

The comprehensive research covering over 8,000 advisers from 1,357 firms, reveals that 79 per cent of adviser turnover comes from initial commission, 16 per cent from renewal commission and 5 per cent from fees.

The survey, in conjunction with Ernst & Young, shows that 56 per cent of firms have two or fewer registered individuals, 21 per cent three to five RIs and 23 per cent have over five.

Sixty seven per cent of RIs are self-employed and 33 per cent are employed by a firm. The average number of administration or support staff was 4.4.

Ninety-one per cent of advisers are IFAs, 6 per cent are multi-ties and 3 per cent single-tied.

Of the firms surveyed, 74 per cent are directly authorised, 18 per cent are part of a network and 8 per cent are part of a national firm.

The report shows 43 per cent of firms have no technology system at all or use their own spreadsheets and paper-based systems.

Only 24 per cent of firms reconcile commission electronically and 3 per cent of RIs receive daily commission payments.

True Potential says this is the most extensive adviser study ever conducted.

Senior partner Daniel Harrison says: “Until firms are able to manage their resources more efficiently in order to retain and increase profit, there is little chance that a reduction in commissions will have any effect apart from making firms leave the market – in turn, making it more difficult for consumers to get advice.”

Syndaxi Financial Planning managing director Robert Reid says: “This does not surprise me. If the companies are going to continue to pay initial commission, people will take it. I do not believe the theory that most IFAs are moving to a passive income stream. It is not a light switch, you have to phase the transition.”


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