Personal Finance Society chief executive Fay Goddard has warned some adviser firms have not fully grasped the impact of adviser charging on profitability.
Speaking at a Perspective Financial Group roundtable, Goddard said advisers have focused on getting qualified but the abolition of commission and moving to adviser charging is now a more fundamental change.
She said: “My biggest concern is, is it profitable? I am still not convinced advisers have addressed the whole issue of the value chain. Even fee-based advisers up until now have used commission offset but this is a very different proposition from the adviser charging approach.”
Goddard said she is hearing talk of commission going from 5 per cent up front to adviser charging of 2 per cent.
Goddard added: “What is that going to do to profitability? It is going to be a bumpy ride.”
Vanguard head of sales Neil Cowell said: “The acid test will be whether there is an explicit exchange of value between client and adviser and for those firms that are able to articulate that exchange of value that will be a real differentiator.
“Asking ‘How much will I charge in the new world?’ is coming at it from the wrong angle. The question should be, ‘What will I charge for?’”