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FSA: 33% of consumers think advice is free

FSA Skyview 480

One third of consumers believe financial advice is free, including many clients who currently receive advice, research from the FSA suggests.

The regulator polled 2,026 adults last month about how people think financial advice is paid for, and found that 33 per cent of respondents thought they did not get charged for getting advice.

A further 29 per cent said advice is paid for by an upfront fee, 14 per cent said people pay a monthly or annual fee for advice, while 24 per cent said they did not know how advice was paid for.

A breakdown of respondents shows 38 per cent would never consider taking advice from a professional adviser, while 32 per cent would consider taking advice. A further 17 per cent said they currently received advice, and 13 per cent said they did not know.

Of those who currently receive financial advice, 49 per cent believed advice was free.

An FSA spokeswoman says: “Advice has never been free, but this has not always been made clear. The changes under the RDR mean people will know how much advice costs and that they can make an informed decision about whether they think it is appropriate for them.”


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There are 38 comments at the moment, we would love to hear your opinion too.

  1. So thats at least 668.58 people who’ve landed on the MAS website….

  2. Nice one FSA 67% of consumers realise they are paying for advice through commissiom etc so why ban it. FSA head in sand again

  3. Did they also ask how many thought the cost of regulation by the FSA was also free.

  4. Sherlock Holmes makes a return… assuming that 2/3rds think its not free, I wonder how many of them actually had any clue about what it costs? does the FSA? It must be rather disappointing for the regulator to reflect on fairly poor understanding of financial services, which is one of their main mandates. Oh dear.

  5. I can probably safely assume that the majority of those polled, who have received financial advice, did so by using a bank. We all know that they portray the advice as being free whilst charging astronomical AMCs to cover the ‘free’ advice. Yet again we ‘proper’ advisers (not salesmen who are to be found lurking in bank lobbys) are being crucified by the FSA because of the way that banks have, and continue to, conduct their business affairs.

  6. So 67% know how advice is paid for. So the majority of people recieving financial advice seem to know and are happy with the method of payment for that advice.

  7. I would say that a lot of the basic advice I give is free, I got a lead a few weeks ago I went to see the clients as they wanted to invest some money after an hour I had to explain to them that they could not invest anything due to they had other issues of repaying debt and after taking into consideration emergency funds thay had no money to
    Invest, this is a regular occurrence, how can you charge someone for basic common sense advice! If I explain on my first telephone conversation that the first interview is free then it’s hard to charge a fee for this type of meeting.

    It all depends who they have surveyed!

  8. Incompetenmt Regulators 19th December 2012 at 11:11 am

    The FSA is telling porkies

  9. It would be interesting to run the same survey in (say) 1 or 2 years time to see how this changes.

    It would also have been interesting if the clients of Banks/Building Societies had been differentiated from those of IFAs to see whether that would have made a difference to the ratios – I suspect it would.

    The biggest issue for me is people who are clearly being charged for advice yet they are oblivious that there is such a cost and also how it is being applied.

  10. On a recent poll how many people underdstood how the FSA gets funded? Answers on a postcard please.

  11. I don’t know if KFIs for investments have to state commission paid as they do for mortgages. I think it would have been helpful if FSA would have mentioned which products they were referring to. If consumers taking out mortgages, had received advice and KFI and still argued they thought it was free or did not know, this would simply show that consumer do not listen or read the information they are provided.

  12. So can the FSA please contact MAS and tell them to stop spending our money on TV adverts suggesting that advice is, well….free?

  13. Advice is free according to MAS TV adverts…….but paid for by fees

  14. Doesn’t this just show how the old system of commission disclosure wasn’t working and how some advisers particularly those working in the banking community have been effectively lying to their customers.

    I apologise for the strong language in my comment but it is obvious that RDR is partly brought about by the industries inability to come up with sensible proposal that dealt with the fact that commission was not been disclosed in all cases.

    You may be an adviser who has been disclosing and thinking that RDR is a waste of time, but what you have to think about the large percentage of advisers and indeed companys who choose not to disclose commission or explaining that it is a different type of charge that does not effect the customer. In my experience this has been a widespread problem that effectively blights the lives of other financial advisers that get tarred with the same brush. I personally think that fee-based advice on investments and pensions will be much clearer to all and in the end will benefit advisers more than say fund managers and indeed life offices

  15. The MAS advertising campaign didnt really things did it!

  16. So you put adverts on the telly saying “Ask MA, our advice is independent and free”.

    Then you do a survey and discover that some people think that advice is free.

    Really?? Maybe that’s because you’ve spent £20m of my money telling them it is.


  17. As it is reported this survey is completely without value, we don’t know what the questions are and how they were framed nd let’s face it, the regulator doesn’t have a great track record in ‘research’:
    If so many people think advice is free, why aren’t they grabbing it?
    Of those with advisers how on earth do they think they are paid (they may not know or understand but you cannot tell me they thought it came at no cost at all from anywhere)?
    To be fair, some may have had an initial discussion with an adviser, which may have contained some generic advice, that would have been ‘free’ – albeit paid by other customers / clients.
    It also shows 2/3rds know that advice costs. Why lump in those who don’t receive advice in the first place, it is bound to skew the results? In fact, all it does show is that the FSA has failed miserably in educating them, can’t lay that one at the feet of the adviser (perhaps the MAS message needs looking at!)
    It also demonstrates that those who receive advice also receive so much rainforest and irrelevant ‘guff’ from all quarters that if they were genuinely not told, didn’t listen, forgot how the advice was paid for they also never noticed it in the post sale disclosure documentation which has been around for years and, rightly, beyond the control of the evil advisers.
    How many gave any old answer just to get to the end of the survey (ever done that?)
    I wonder if the FSA asked the sample whether they knew they were paying for this survey through fees on advice, bank accounts, car insurance etc….
    I wonder how many knew that Hector has also picked up over £250k since clearing his desk six months ago?
    On the face of it just yet another waste of time and money.

  18. My recent poll highlighted that nearly 11% of clients thought the FSA was a force for good.

    This is up 9% on last years poll.

  19. @ Peter Herd… come on chum… are you really claiming bank advisers have lied to their cleints any more than other advisers whose clients have been under the misconception that advice has been free.

    As far as commission disclosure goes, there are rules around this, albeit the adviser can choose whether to disclose commission on pure protection business.

    Get a grip!

  20. Peter Herd, you stand out from the crowd due to imbecility.

    Please go away.

  21. Why is it that major banking groups of got out a financial advice is it because they now have to get a signed fee agreement disclosing in what the actual advice costs.

    Grey Defector

    I’m going nowhere thanks as I’m standing up for the many financial advisers who do a good job day in day out and want to be a professional adviser for their consumer. Maybe that’s the message you don’t like.

  22. OMG do the FSA live in some other dimension? Of Course Advice is free, it always has been, we dont get paid commissions for giving advice, we get paid commission for arranging a product. Let me explain it in simple terms that MAYBE the FSA can understand. I go and see my client, Complete my fact find ect. I go away, write a report and send it to the client outlining recommendtions and enclosing relevent literaiture. A week or two later I visit the client again, If they are happy with all my recommendations, they say “yes thats all fine I wish to proceed” I will then arrange the product and at some stage in the future I will be paid my commission. However If the client “Says Im really sorry but for various reasons I cannott go ahead” I shake the clients hand and I on my way. I’ve earnt Zero money. The client does not receive a bill for my time. How then Oh wise one’s at the FSA is that not FREE ADVICE??? Ive given the advice, The client hasn’t paid for anything! Even a simpleton could tell you that the advice has is in fact been given for FREE. Im quite within my rights to tell my clients I give free advice and I only receive commission If a product is actually arranged for my client. As from 1st Jan my Initial advice will still be fre,e my clients will only pay a fee if i arrange Investments for them and for ongoing advise and service

  23. Hold on a second !!! you have to wonder in what context the FSA ask these questions ?

    “Advice” is / was free in most cases !!! the investment or sale of and investment or life policy is where the consumer is charged !!!

    This is what will change come the 1st Jan where “advice” will now be charged whether an investment is bought or not !!!

    The consumer has no alternative in my view now you get the advice you pay whether you invest or not !!

  24. Who cares what the surveys say, they don’t add to our knowledge of consumer behaviour, have little relevance as the do not differentiate between tied and independent and no data as to the social standing of those questioned, they probably just went into a local homeless shelter and consulted the poor wretches whose lives are in tatters anyway, just as many transaction based IFAs lives will be post RDR.

  25. @ Richard Wright

    Beautifully put !

    And exactly why Providers who will be unable to pay to market their products (unlike any other industry anywhere) will beat a path to the OFT claiming restriction of trade !

    Free market economics/capitalism and all that – let the market decide not the regulator – trying to buck/influence the market always fails

  26. It would be interesting to ask people to watch the MAS advert and then ask if teh service is free. Furthermore ask if the Money Advice Service give Advice? Then ask how they think it is funded.

    Finally it would be interesting to ask the people who were interviewed if the understood who the FSA are and if they know who the FCA are and what either of them actually do.

    Why not ask some meaningfull questions? instead of beating about the bush by asking how advice is paid for, why not just ask if they would rather have someone earn commission from a product sale, or if they would rather part with cash and pay a fee?

    I am sure there are a great deal of the public who would be quite happy to pay fees, however I suspect that there will also be a vast number who would be quite happy for commission to be taken.

    Unfortunately we have all been dictated to by the FSA yet again.

  27. Advice shouldn’t be free but often it is.

    Advice should be charged for and paid but, often it isn’t.

    Why this conundrum? Because many clients will not pay and some will.

    The old system of building a markting allowance into the product worked because it spread the cost and was seen – quite rightly – as no different to how Sainsburys and Tesco operated.

    The ‘problem’ that the FSA is trying to resolve is bias caused by the marketing allowance.

    I suggest that with a £500m annual budget the regulator should be easily capable of searching out and punishing major transgressors thereby leaving the remainder of us to use or not use commission as we decide.

  28. So? An FSA spokeswoman says: “Advice has never been free, but this has not always been made clear. The changes under the RDR mean people will know how much advice costs and that they can make an informed decision about whether they think it is appropriate for them.” but just make sure, we will remove the affordability of financial advice via RDR and exclude those who ‘ thought’ they were getting free advice by pricing them out of the market. Then when the IFAs go out of business, we will hand their clients to the banks ‘on a platter’!

  29. I have given free advice to many clients. I have as we all have told many people not to do anything at all and not charged.

    Did the FSA spokesperson explain to these people that they were paying for the survey as they do everything through hidden charges made on the industry which they ultimately pay?

    It’s the bit that still seems to get lost in all this. It’s the consumers money that funds the FSA and its massive wage bill. Its the consumer that pays for MAS, not us. We get our money from the consumer as do all finacial institutions.

    If the FSA did not exist the cost of products would be significantly less and performance on investments and general profitability would increase.

  30. Hello Girls!

    And we all know the NHS is free!

    That’s the lie peddled by the same people who now want to make sure the public know the cost of advice! You really couldn’t make this stuff up.

    Anything that emanates from Canary Whiff is all lies, damned lies and bull extrusion.

    Love and kisses

    Larrykins xxxx

  31. Just a thought but (Peter Herd | 19 Dec 2012 11:45 am) if you give the client a printed quotation ( as you are supposed to) I am sure it has the commission on it or do you give your clients a quotation. Maybe they just do not read the quote or understand it amongst the other paperwork you undoubtedly send.

  32. You really couldn’t make this up Guys.!!! On this very page there are links to previous articles related to this one. In October of this year MM published an article entitled “Why cant IFA’s carry on giving free advice?” This is what it said! :-
    “The FSA says it does not understand why firms cannot offer clients free simple advice services after the RDR.

    Speaking at a Personal Finance Society RDR seminar in London last week, FSA head of investment intermediaries Linda Woodall (pictured) said: “Some advisers have told us they currently offer free services to clients with simpler needs but they will not be able to do this going forward. I would ask, why not? If they have been able to maintain a profit now without charging, why would that necessarily be any different in an RDR world?”

    So Linda Woodall says we do,and should continue to give free advice. Today However the unnamed FSA Spokesman says and i quote”“Advice has never been free, but this has not always been made clear” unquote. I think this just about sums up what a circus we have at Canary Wharfe, Managed by clowns, with its former ringmaster securing a 3 million quid a year post at Barclays bank. AS I said before you couldnt make this up !!

  33. As IFAs we have been told to clearly set out to the client that the cost of the product and the cost of advice are two entirely separate entities. This gives the message that advice is not free.

    Then you launch the MAS which states that advice is free.

    No wonder the public are confused.

  34. Free advice – the advice is not free, the IFA absorbs the cost – tell the client that
    And why does the FSA not defend itself on these things?
    Happy New Year

  35. @Richard Wright

    Advice is rarely “free”, it is possibly initally conducted at no cost to the individual client, but it is not free, it is conducted at the firm’s expense and, ultimately and indirectly through any credible business model this must fall on the costs of those that do pay. I would also question any model that puts extensive adivce without requirement to pay and rests everything on a product sale. It can result in both bias, is unfair to clients subsidising other and it under values what any decent adviser does.


    The changes in January do not require any shift from uncharged advice whether a prooduct is taken out or not. The changes simply mean that a separate or adviser defined product charge is levied. The stages at which a client is invoiced is a entirely a matter for the firm providing the service. If they want to provide an introductory stage without obligation to pay, they can do this as they always have.

  36. @Peter Herd “the large percentage of advisers and indeed companys who choose not to disclose commission or explaining that it is a different type of charge that does not effect the customer” You’d better have some pretty good proof for a statement like that…………

  37. I went to ASDA the other day, I found an offer on mince pies “Buy One Get One Free”, I thought naaah its a trick as I’m still paying for the second mince pie as its price is factored in the profit margin they make on selling the first one….and walked away from this blatant scam. ASDA should charge me a fee for my free mince pie.

  38. Who cares? None of my clients are under any illusions about the costs of my advice and services and nor do any potential new clients phoning in. At an early stage in the conversation, most of them ask: What do you charge?

    Free advice is a myth (still) peddled by the banks. Hopefully, that will be dispelled after the end of this year.

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