Only 10 per cent of IFAs believe the adoption of the menu-based system for the remuneration of advisers will signal a definitive move towards consumers opting to pay fees.
A survey of more than 200 IFAs carried out by George Street Research for Money Marketing reveals that 55 per cent of advisers think the menu will make no difference to the number of clients paying fees while 30 per cent believe that it will have an impact on the market.
Seventy-one per cent of respondents said less than 10 per cent of their clients currently pay fees and only 7 per cent say more than half of their clients prefer fees to commission.
Advisers say one of the main reason that clients are reluctant to pay fees is because they potentially attract VAT. They say if clients are given the option of whether or not they pay VAT, they always choose not to.
IFAs also suggest that client choice is largely determined by how the two options are presented. If they are told that they can either pay £1,500 up front or offset the fee against provider commission, they always opt for the latter.
Millfield chief executive Paul Tebbutt says: “If you have the choice between paying VAT and not, you are going to choose not to pay tax. Every businessman and individual across the country will be looking to mitigate their tax situation, so why would they pay fees?” Fee Based Advice sales director Nick Peters says: “The menu system itself will not drive clients towards fees but there is a groundswell of IFAs looking to increase the proportion of their income from fees because there is less money to be made from commission these days.”