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‘Free’ advice that will cost consumers dear

Changes made by the Government to the financial services industry have patently failed to address the problem of the millions of people in the UK who have traditionally failed to take responsibility for their long-term financial welfare.

However, those financially savvy individuals who rec-ognise the value of paid-for independent advice over the sale of advice-free but high-commission products will undoubtedly draw significant benefits from the new approach adopted by many IFAs.p/>Yet even the wealthy resent paying for financial advice, however transparent the charges associated with that advice might be. For many, an annual fee of, say, 1,500 to monitor an investment portfolio, savings plans and pensions or more than 500,000 would seem good value, particularly when it removes the burden on the adviser to sell products to achieve a profitable business.

But the financial services industry has got a lot of work to do. It will take the industry many years to win back the confidence of customers cynical about independence and the value or quality of advice. During this time, the number of IFAs will probably fall to less than 50 per cent of today’s number.

Increasingly, regulatory and compliance issues will mean that many IFAs will, over time, turn instead to tied or multi-tied status to service that large proportion of the public that will remain averse to paying for advice, preferring the free approach of the tied and multi-agents and commission to pay for the service.

With no real service or client relationship, most of the public will continue to wander from adviser to adviser and back again in search of a solution, ending up with only a diverse range of products based more upon the sales focus of the day than their specific needs.

Mike Nevill
Managing director,

Vantis Financial Management,

Middlesbrough

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