Ernst & Young says it will take advisers until the end of 2013 to transition their businesses away from the traditional “three plus a half” charging model.
Prior to the RDR, many advisers used a standard charging structure of 3 per cent up front plus 0.5 per cent trail.
Ernst & Young EMEIA financial services executive director Malcolm Kerr says rather than moving to a model where their fee is linked to the cost of service, many advisers have simply transposed their pre-RDR commission into post-RDR product fees.
He says: “We thought, perhaps naively, that advisers would have developed fee-based advice propositions and discussed them with clients and be ready to go on 1 January.
“In conversations with advisers and advisory firms a lot have said they still feel in a state of transition and are learning new approaches to dealing with clients.
“My perception is a lot of advisers are finding it quite difficult to explain to clients they have to pay a fee for the advice rather than for the transaction.
“I think the world will look very different at the end of this year, both in terms of the number of advisers and also the propositions.
“We think business models will be more orientated towards a fee for the service of advice, irrespective of whether the client goes ahead with a recommendation.”
Kerr says while most advisers say they intend to tailor their proposition to meet the needs of “up-market” clients, the “three plus a half” model many have adopted is skewed in favour of people with smaller funds to invest.
He says: “Most intermediaries are suggesting they intend to move up-market, yet fee structures as a percentage of investment means that the £50,000 investor can get a better value deal than the £200,000 investor.
“Bluntly, some fee structures are not yet aligned with the strategies – or indeed with the cost of delivering the service.”
Syndaxi Chartered Financial Advisers managing director Robert Reid says: “A lot of advisers are finding it difficult to explain to clients what they do and why it has a value. That is the challenge the RDR presents.”