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Guide on the way to switch to fees

Consultancy firm the Insurance Marketing Department has produced a guide to help IFAs switch from commission-based remuneration to a fee-based charging structure.

The firm says this is in response to the pressure on IFAs to look at alternative ways of financing their business.

It has found that, with commission margins being squeezed, an increasing number of IFAs are now seeing fees as a new and more profitable way to deal with clients.

The guide explains how to set up a fee-charging system and how to keep clients aware of any developments.

The guide says there is nothing intrinsically wrong with commission and it has the benefit of not being subject to VAT.

But on the downside, it claims commission can make consumers think financial advice is free and that it is the insurance company that meets the cost.

Insurance Marketing Department director Stephen Phillips says: “The financial consequences of advice given by an IFA can be just as far-reaching as those of an accountant or solicitor, yet many investors have historically been reluctant to pay for the advice. This has got to change.”

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