Recent comment from the FSA raises some interesting points with regard to what the client is actually paying for.
There is little doubt that commission can and does influence advice and, ideally, financial services should be advice-led rather than product-driven. But the FSA has a problem in that it apparently seeks the elusive Grail of paying a little and getting a lot.
There is strong evidence, especially from the US and Australia, that the remuneration of advisers in those countries comes principally from service and not transactions. It must be in both the advisers' and the consumers' best interests that investment costs are both transparent and reasonable.
The cost of advice, however, is a separate issue and the consumer will pay not according to a “market rate” but related directly to the value of the advice given. Clearly, this will be determined by a free market and should not be in the remit of the regulatory authorities.
The FSA must be careful. If it seeks to artificially “cap” the cost of advice, it will undoubtedly disadvantage the very section of the public it seeks to protect – those that need the advice but cannot afford to pay for it directly. The real priority is to protect the interests of the consumer by ensuring that good advice, given by properly regulated and educated advisers is open to all and is capable of being paid for by the most appropriate means.
SG Wealth Management, Norwich