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Deloitte: Half of consumers reject 3% adviser charge

Deloitte Office 480

Research from Deloitte suggests over half of consumers would be likely to reduce the number of times they used an adviser if they were charged 3 per cent of their investment.

A report from Deloitte on “Bridging the Advice Gap”, published today, estimates there will be up to 5.5 million customers who will stop using or lack access to financial advisers post-RDR as a result of adviser charging. The proportion represents 11 per cent of UK adults.

Based on an online survey of 2,140 UK adults, Deloitte found 87 per cent of customers who bought a savings or investment product via a bank adviser in the past three years assumed the advice process was free.

The research found 33 per cent of those polled with less than £50,000 and 32 per cent of respondents with more than £50,000 said they would stop using advisers altogether if they were charged for advice.

Some 56 per cent said if they were charged a fee of between £400 and £600, or 3 per cent of their investment, they would be likely to use advisers less.

Willingness to pay adviser charges was influenced by the type of adviser, with less than 2 per cent of customers who have used bank advisers, websites or internet forums, or employer-provided advisers prepared to pay a one-off fee of £300 for advice.

But the proportion of people prepared to pay a £300 one-off fee rose to 9 per cent where respondents were IFA clients, and to 14 per cent for accountant or solicitor clients.

Asked how they would react to being charged for an adviser’s time, almost a third said they would do their own planning, research and administration. A further 27 per cent said they would stop taking advice while another 27 per cent said they would bypass the adviser and go direct to the provider.

Some 24 per cent said they would use advisers less and only pay them when it comes to making important financial decisions.

Deloitte suggests banks are most likely to see customers decline post-RDR, as they are the biggest player in the mass market, where customers are least willing to pay for advice. Over half of respondents felt bank advisers are too sales-orientated, and 34 per cent said they did not trust advisers working for banks and building societies.

The company says providers who want to continue to focus on adviser distribution will need to develop strategies to “win” the best advisers.

Deloitte says: “Assessing the likely winners and losings among advisers, and which of the winners are best placed to support their distribution strategy, will be a key activity for those seeking to continue with adviser-led distribution.”

It says providers will need to consider “how to compete for winning advisers, for example, via product manufacturing processes that allow advisers to offer tailored products to high-end customers, or via software which increases the quality of adviser service.”

The company adds providers will also need to consider which advisers are unlikely to succeed post-RDR who are not differentiated well enough from competitors in terms of scale or quality of service.


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There are 25 comments at the moment, we would love to hear your opinion too.

  1. Nice work – FSA, consumer groups, and vested interest minority niche market advisers who advocated getting rid of commissions. If you had actually consulted consumers instead of following your own version of what was good for them this conclusion – a reduction in consumers taking advice – an increase in the savings gap – and a reduction in a substantial earner for the UK Treasury was inevitable. When will they ever learn ???

  2. Alasdair MacDougall 7th November 2012 at 10:57 am

    This survey probably tells you more about the fundamentally flawed and non-compliant advice process of the bank adviser.

    If investors thought the advice was free, it strongly suggests that there has been widespread non-disclosure of commisions, both initial and fund based.

    In the world of bank assurance, following the miss- selling of endowments, personal pensions, PPI, precipice bonds, structured products and LIBOR manipulation, non-disclosure of commission is not exaclty a shock revelation.

  3. Peter Davies @ Create Wealth Management 7th November 2012 at 11:13 am

    What all these researchers forget is that most people have been paying an initial charge of between 3% and 5.25% initial charge on their investments for the last 20+ years so whats the difference with a 3% fee coming out of their investment. In some cases it will be less than they have traditionally paid.

  4. Derek Bradley ceo Panacea Adviser 7th November 2012 at 11:19 am

    We conducted our survey over a two-week period in December 2011, yes nearly a year ago, dealing with, in particular, the attitude of clients of IFA firms toward the RDR. The key finding was that the general public did not understand and were just not ready to engage with a fee only advice regime.

    So with some 53 days now left, should we be surprised at the results of the Deloittes survey?

    The point this latest research and ours reveals is that there continues to be an awareness creation problem, rather like making seatbelt wearing compulsory, the digital switchover, the dangers of Rabies, binge drinking or having unprotected sex on holiday and that required a sponsored message from the FSA to tell the public “this is how it will be in future” as well as from provider firms and IFAs.

    Our survey was all about preventing consumer detriment by digesting consumer perceptions, understandings and appreciation of the RDR from those who know them best their IFA.

    On all counts it is now clear that what the RDR will produce for the masses, as no sense of reality has been brought to bear, is the most spectacular case of consumer detriment in the name of regulation, by the hand of regulation that anyone has seen since the OFT decided that the MCA (Maximum Commission Agreement) was anti-competitive.

    Our survey saw some 741 respondents and the results, with comments, stretch to over 150 pages. The document made compelling reading.

    Some key facts to digest

    1. Over 93% of IFA clients did not understand what the RDR was and the benefits it is supposed to bring them.
    2. Only 20% know and understand that they will have to personally pay for IFA services with no commission option being available.
    3. Alarmingly, 85% of IFA clients did not understand the difference between the new interpretation of independent and non-independent advice
    4. 61% of IFAs need help in educating clients about the impact and effects of RDR
    5. Not surprisingly 93% of IFA clients would prefer a commission choice remain available to allow the client to decide which remuneration model suits them best.
    6. 61% of IFAs see they will lose clients as a result of fees being the only way.

    Our respondents came from all over the UK. The age demographic and their time in the industry shows that the opinions and views are made with the considerable benefit of “time served” experience.

    The late Steve Jobs was on record as saying about Apple technology products “this is what customers pay us for – to sweat all these details so it’s easy and pleasant for them to use our computers. We’re supposed to be really good at this. That doesn’t mean we don’t listen to customers, but it’s hard for them to tell you what they want when they’ve never seen anything remotely like it”.

    The FSA should now see that they have not really listened to the consumer, in fact they have not really tried to engage with them at all if this latest survey was anything to go by.

    Why not?

    As Steve Jobs might have said to the FSA “Sweat all these details so it’s easy and pleasant for consumers to get the advice they want, from who they want and possible even let them pay them in whatever way they want, they’ve never seen anything remotely like RDR and I suspect for many in 2013, they may not like much of what they see”.

  5. Peter is correct.

    The reponses might have been different if the question was “Commission paid to advisers for lump sum investments was typically between 3% and 5.25%. Do you think that adviser charging from next year , of a typical amount of just 3% , represents a better deal for consumers?”

    The banks and the “free financial advice merchants” have misled their clients for years.

  6. Advice is currently free. If that were not the case then going direct to a provider would mean a provider rebating that charge to the investment. Clearly this does not happen. It’s the same cost whether advice is sought or not. So, advice is free. From 1 January customers will be charged a fee for financial advice. When they realise advice is no longer free they will obviously do without it.

  7. Neil F Liversidge 7th November 2012 at 11:35 am

    No need to do a survey on how many IFAs would reject the FSA/FSCS/FOS fees, as we have no alternative when the FSA says “Stand and deliver”. So the FSA obsessively tries to force down IFA earnings whilst forcing ever upwards its own take. Ever get the feeling we are regulated by the economically ignorant?

  8. I thought the FSA had carried out research indicating people would gladly pay for advice. Otherwise why have we carried out this very expensive exercise to introduce the RDR. The whole thing when costed over the Financial Services Industry has cost billions, for which the consumer in some form or other will pay The alternative would have been to enforce a maximim commission arrangement so that we were all receiving the same. Sadly we will just have to live with the consequences which mean that a lot of people will not get financial advice. At least I will not be responsible when it all goes terribly wrong.

  9. And yet they will be happy to pay 1% commission when selling an house where the estate agent has no liability whatsoever and just acts as an advertising go between!

    And to those who will only pay for advice for important decisions – if there is anyone left be prepared to pay through the nose.

  10. I think the 5.5million less consumers using/seeking financial advice says it all. They will either DIY and get it wrong quite a few of the times or not do it at all. This speaks volumes dont you think? Hats off to the FSA for their forward thinking on the RDR. It really would not have been rocket sciene to do somethig like this when RDR was in its embrionic stages and it could have quickly been consigned to room 101. This is really where it deserves to be. Maybe this research really needs to go to Martin Wheatley and the TSC so they can have a word with ech other and air their views. Its amazing how many pro RDR-ites are becoming more and more quiet as we get closer to the deadline and all the consequences come to the surface.

  11. Hey, CFPs, the FSA has changed the goalposts and this will change the consumers mindset.

    Nic the Dic said last week that consumers are being turned off.

    It’s a bloody nightmare. FSA = Feckless Scumbag Authority

  12. The repsonse of any survey depends on the question asked.

    Alistair McDougal and Peter Davies, I agree with entirely.

    “Yawn” to all the dinasours who cannot explain fees to clients.. The issue is not over investment commission v fees. Both are costs and if an investor think commissions are better then they have misunderstood it or has the wool pulled over their eyes..

    Any intial cost needs to be fair and 3% reducing for higher investments is much lower than many of the historic commissions. Do the maths though and far less attention should be paid to this than ongoing costs/benefits and how much the adviser charges for changing investments in the future.

  13. Ken Warren says: “Advice is currently free. If that were not the case then going direct to a provider would mean a provider rebating that charge to the investment. Clearly this does not happen. It’s the same cost whether advice is sought or not. So, advice is free. ”

    This is rubbish and assumes the use of commission bearing investments, all of which have a higher cost to provide the commission. If the consumer goes direct the investment company pockets and they pay for advice they do not get. It is NEVER free. Viritually all our inversted clients do not have any product that pays any commission and the charges are lower, even with our fees added.

  14. Lets face it the FSA & others will not be happy until we earn nothing & offer free advice. That’s their idea of a business model. At the end of the day you agree the basis for advice at outset & this has evolved. Every client is different & needs tailored terms to suit them & advisor. May come as a shock to the commission bashers that 3% aint very much when client requires a mini s&s ISA. So there may be a need to charge the equivilent of 6% to the little guys. Oh they are the ones the FSA want to exclude from advice, sorry! Anyone remember Equitable Life’s model?

  15. Well here’s an interesting one to wrestle with for the whole lot of us…Anyone noticed how product annual management fees appear to be getting pushed up in the run-in (by around 0.5%) with some providers?

    So, it appears that in running the rule over Advisers’, the levels at which product providers can generate their income from existing funds under management has been missed.

    So, anyone for consumer detriment or unintended consequences? You bet..But WE saw it coming!

    With less advisers, who will advise these consumers on how competitive their contracts actually are? Inaction will lead to a useful source of replacement income for providers, to the detriment of existing savers…Well done everyone!!

  16. Clients will indeed pay for advice when they perceive a value to be gained. Where they do not perceive a value they won’t and I really don’t see why we should blame them for that.

    The problem with a debate about how much they are prepared to pay or indeed if they will pay at all is that most consumers don’t have a good “reference point”. What is the price that they should pay for advice? Who knows?

    And what I charge, what you charge and what she charges can all be different because there is no common price for advice we all deliver it slightly differently.

    I do worry that so many people seem to think that advice was available for free it never was (at least the advice that was worth paying for was never available for free)

    I suspect that one of the reasons we have the RDR is because the “industry” (whatever that was) perpetuated the myth that advice was for free and trying to recover from that position is going to be really tough for some.

    About 50% of the adult population never engaged with a financial adviser of any type anyhow so I suspect that will continue post RDR anyway.

  17. If a customer goes direct the commission the IFA would have received is not rebated to the customer. This PROVES that advice is free. You can call it whatever you want but you cannot call it a fee for advice if no advice has been received. The people who have been duped all this time are not consumers, they are IFAs. That charge pocketed by product providers when no advice has been provided is the MARKETING cost. Calling it “cost of advice” all these years was wrong from the start. Getting rid of commission will not make products cheaper. Getting rid of IFAs will simply get rid of competition between providers, and the cost of products will actually increase as a result of RDR. Any fees charged by IFAs (the few that are left) will be added to the cost. The whole exercise is about getting rid of advice and advisers. It’s designed to increase the profits of big business.

  18. I really do feel that there is an underlying issue to all this.

    It seems to me that the reluctance of people to pay a fee is directly correlated to the lack of disclosure they have received over the years. With the advisers commission appearing on page 42 is it any wonder that may think advice has been free?

    How many advisers have either hidden or blurred the disclosure? How many have actually said to a client – “If you invest £50,000 into this bond I will receive £2,500 and this will be deducted from your investment”. I wonder what client reaction to that would have been?

    I feel that it precisely because the regulator was well aware that disclosure was not working as intended that the RDR rule in this respect was formulated.

    You can still take (in most cases) your remuneration from the product, but there is now a lot less wriggle room to hoodwink the customer.
    Those customers who have been used to transparent disclosure won’t turn a hair at the new procedures.

    In this respect you have no one but yourselves to blame.

    PS I do know that the criticism doesn’t apply to everyone – but the majority (and probably many Network members) are the ones to carry the can.

  19. @Ken,

    Not right. Many providers rebate and provide a cheaper product if the customer goes direct and certainly do not ‘pocket’ the difference. This can be seen in the proliferation of factory gate priced products which are way cheaper to the customer.

    However agree with you that the commission paid to an IFA is indeed a sales and marketing cost and not an advice cost. That is exactly how it is treated in a life company’s accounts. Likewise where the distributor is say a bank there is no commission but still an S&M cost. Worst of all is direct distribution (eg direct mail) this carries the highest S&M costs. Ironically IFA distribution via commission was easily the most efficient. Product providers did not want to see it go.

    For existing business my read is the FSA guidleines imply we cannot pocket any commission saving, and for new post RDR style products anybody can see that with the commission stripped out the product is correspondingly cheaper. companies still have S&M costs but inlcuding admin set up these are of the order 0.5% initial or less.

    What RDR does do is shift capital strain away from product providers onto the customer since the customer now has to pay the adviser ‘up front’ for advice. Under the commission model providers paid up front and hoped to recoup the costs over many years through charges. That burden has been relieved hence post RDR products donlt tend to have things to cover that risk like exit penalties.

  20. Just saying that advice has always been free over and over doesn’t make it any more true. Commission is always factored into the price of savings products and providers include it in the price even if selling direct only to avoid undercutting their advisor channels. Regulation means advisors must demonstrate that they have given best advice before they can claim their commission. This absolutely does not make advice free. It means the customer pays for it whether she takes it or not. It’s like the cafe offering apple pie and cream for a fiver and not giving you a discount if you don’t want cream. You really think the cream is free in that picture?

  21. @ David Parkinson – spot on comments!

    We as a business will have to get a lot better at explaining advisory costs and why they should be using us.

    As for the guff that Banks will see a fall in business this would only be the case if they too were restricted or independent. When you are Tied for example in the case of First Trust Bank to Legal & General you can still take commissions with 100% allocation rates and exit penalties on contracts.

    SJP the high powered sales group will market their own manufactured wrappers with 100% allocation rates and 3% marketing allowances to Advisors.

    Did the FSA intend this consequence and distortion? This is an unfair and unlevel market forced by a Regulator.

    PS Congratulations Celtic on a great win last night against Barcelona – the underdog can win sometimes!!!

  22. Interesting discussion on this subject, as I thought there would be! Of course the positive side of the argument has yet to be mentioned as so far we have all spoken in regard to new business. We now charge fees for the time we spend acting on behalf of clients. So when clients want to sell, re-register etc we charge fees which so far clients have been happy to accept. We are currently working on four client projects which are not related to new business for which fees are accumulating. IFAs are going to have to add value to retain and attract clients. Surely that should not be a problem? I have always had sufficient confidence to know that my advice is something for which people should pay. Now they will and as a businessman I am not interested in those who don’t want to.

  23. So, in summary, although the majority of investment clients probably understand that the commission of between 3-5.25% of funds invested formed part of the overall charging structure of their investments in the past, they are apparently unwilling to pay say a reduced average 3% for adviser charging.

    Some consumers don’t like the idea of paying for advisers time even if they do not purchase a financial product. Then don’t deal with folk who do not value your services.

    Since when did consumers of financial proucts (our clients) even think their adviser was not entitled to payment for time spent on their planning ?

    None of my clients seem to be under any illusion I trade for profit and that profit is provided by the client, who ultimately acquires a high degree of protection if I get it wrong and they lose money, or if their provider goes bust, I and all the others pay them out through our FSCS levies.

    A question within this survey to indicate whether the results can be seen as correct is to say “Mr / Mrs Client, what hourly rate would you pay for professional financial planning advice and implementation service?”

    Then and only then will be get a feel for how much our clients think we are worth.

    My own survey conducted with my clients in 2011 indicatedthat a maximum hourly charge of £50 per hour worked on behalf of a client was a fair price.

    Less than a chuffin plumbers rate.

    Looks like a change of career to a more profitable and less dangerous occupation is in the offing, maybe steeplejack or a steel rigger, at least they don’t have a long stop (Oooops of course they do silly man!) The ground (SPlat)

    That truly says it all!

  24. @Timbo – with you on that one. The argument is rally moot. It’s now over and done.
    Clients will pay for advice, they just need to see value. Evidence that and you’ll be rewarded.
    Our clients are charged combination of fees and commission, year 1 that equates to around $15k – $20k. That’s Mums and Dads. middle market, without even counting any income from investments. and they get value for money! Yes that’s in the Australian market, but trust me it’s much more regulated than where you are right now… so get used to the idea that it’s not over yet. The change will continue.
    Want to charge better fees – create a better value proposition.
    Any more than 0.5% on FUM is having a lend.
    If you took a 5.25% clip off me @Ned, you better be getting returns in the high teens, early twenties.

  25. Sods —– Law.
    Aug.—- 2014.

    For almost two decades we have strived to get justice for the injustice we have suffered at the hands of a world renowned bank— PICTET & CIE. BANK.

    Two yorkshiremen both running their own small family businesses trying to resolve the problem by taking all the correct legal procedures to recover their monies.

    The matter was raised in Parliament – twice– the FSA investigated the matter concluding that PICTET had rogues operating in their London Bank — but the rogues had left —saying no one left to prosecute.??? —– so there.

    We then approached the Financial Ombudsman Service. (FOS) — our case was dealt with by seven different people —- then our numerous E-Mails were ignored — nobody would speak to us ——-so there.

    We then asked the SFO ( Serious Fraud Office.) to investigate our case —- the criteria of our case ticked all their boxes. — we were instructed not to send them
    any documents/evidence.—— in fact they wrote to us advising us to go to the Citizen’s Advice Bureau.(CAB.)
    Richard Alderman the SFO boss —- who responded to our letter was the same man who would not investigate the “ Madoff” scandal or the “Libor” fiasco.
    The MP’s committee —- said he was sloppy— and the SFO was run like “ Fred Karno’s Circus” —– it was an office of fraud.—– so there.

    Our M.P. approached our local Chief Constable to investigate—– he was called—- Sir Norman Bettison— Chief Constable of West Yorkshire Police —- a force that made “ Dad’s Army” look like the S.A.S. They were inept – corrupt —malicious — from top to bottom. We were criminally dealt with by the Forces Solicitor—- the Head of the Economic Crime Unit —-and the Chief Constable —– so there.

    We were then advised to pass our complaint against West Yorkshire Police to the I.P.C.C. – which we did — they advised us to make our complaint to —- the West Yorkshire Police — we did with reluctance — all we got was abuse and obfuscation. —– so there.

    Sir Norman Bettison —- The Forces solicitor— and the Head of the Economic Crime —- have all been removed from their posts and facing criminal allegations.
    —— so there.

    We even sought justice through the Courts — culminating in a visit to the Court of Appeal-London.— On leaving the Courts of Appeal that day our barrister a “rising star” informed us — that if that was British Justice then you can keep it. He quit the law and moved to Canada —– so there.

    A few years later we learned that one of the judges ( Lord Justice.) in our case at the Court of Appeal was related to a senior executive of the Pictet Bank —–so there.

    The Ministry of Justice passed our case to Lord Myners to investigate — we would rather have had Mickey Mouse or Donald Duck do it. — to this day we don’t know
    —whether he did anything or not —- probably not — seeing that his wife was on the Pictet Prix Board.

    Pictet & Cie .Bank — voted private bank of the year 2013.
    Ivan Pictet —- Voted banker of the year 2012. —- the senior partner — lied on numerous occasions and had documents destroyed — also said genuine documents were forgeries. —– so there.

    Ivan Pictet in Oct. 2013 —- Given the Legion of Honour — but saying that —- honours were given to Hitler — Eichmann — Mussolini —Franco — he’s in fitting company. —-so there.

    MONTY RAPHAEL.Q.C. — Peters & Peters.London. They were the banks lawyers.
    Monty Raphael.Q.C. along with Ivan Pictet withheld crucial documents requested by the High Court —- the FSA —- and the police Fraud Squad. —-so there.

    Monty Raphael.Q.C. became an Honorary Queens Counsellor in March. 2012.
    Monty Raphael.Q.C. became a Master of the Bench in Nov.2012.
    An expert in Fraud —the Doyen of Fraud Lawyers. —– so there.

    This says a lot about Banks — the consensus of opinion is that they are highly paid “crooks” —- no wonder they voted Ivan Pictet banker of the year.

    It appears that crimes in the “establishment.” are honoured by their peers.

    Full Story.—- “google or Yahoo ”


    Ivan Pictet.Banker.
    Monty Raphael.Q.C.
    Ivan Pictet/Monty Raphael.

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