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Percentage of investment is top choice for charging

Charging a fixed percentage of investment is emerging as advisers’ preferred charging method, with concerns revealed that hourly rates will deter clients from engaging in the advice process.

At a Money Marketing round table on adviser-charging last week, Personal Finance Society head of technical Rebecca Prestage said a PFS survey suggests 78 per cent of respondents favour adviser-charging on a fixed percentage basis.

Tax Incentivised Savings Association director of policy Malcolm Small said: “The view from the marketplace is that fixed percentage is going to be the way for most people.

“The focus on fixed percentage means that the debate centres on the economics of client servicing and what level of investment is required, so the percentage model starts stacking up.”

Fidelity International head of UK fund partners Ed Dymott said: “The challenge for advisers who want to radically change their business model is they all have big legacy books of clients that are set up on a completely different basis.”

Prestage said: “Advisers are worried that if they start charging by the hour, how will clients start talking about their family and their goals and aspirations. Clients will stop themselves from picking up the phone with a quick question because they will always be thinking about the charges.”

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