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Public reject paying fees for advice

Only 3 per cent of consumers would be prepared to pay over £100 per hour for independent advice and half would not pay any fee, according to Aviva research.

An ICM poll of 2,053 consumers conducted for Aviva shows that 50 per cent of people would refuse to pay anything for independent advice and would rather not receive advice at all.

Seventeen per cent say they would be willing to pay less than £25 per hour. Less than 3 per cent say they would be prepared to pay anything over £100 per hour for independent advice.

Average rates for giving independent financial advice usually range from between £75 to £250 an hour.

Aviva director of distribution development Stephen Gay says the research shows that the nature and value of advice is not well understood or appreciated by customers.

He says: “The challenge for our industry is to explain and market the diverse range of services that comprise advice and their benefits to customers.

“It is not that customers will not pay for advice, it is just that they will not pay unless they perceive value.

“IFAs provide an excellent service to the public and those who will thrive after the RDR will be the ones that are best able to describe and
market their advice proposition.”

Facts & Figures managing director Simon Webster says: “This research demonstrates that many people will be ruled out of the advice market because the FSA is forcing the industry to go down a path that it does not want to go down.

“The issue is not that advisers will be in trouble because consumers will not pay fees because the good IFAs will be able to charge for their work. It is about consumers who will not be able to get advice and will be pushed into the hands of the banks.”

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Comments

There are 72 comments at the moment, we would love to hear your opinion too.

  1. This backs up everything that the industry has been saying but the FSA refuses to believe. The FSA claims it has done research but if the questions were leading enough they could acheive the answers they wanted. Once again big brother meddling is going to cost the public – Pension Transers (yes it was the Government at the time that encouraged people to leave occ schemes), Stakeholder Pensions (soon to be called NEST) that people cant afford and will lose out on mean tested benefits and RDR which will drive people into Banks (and we all know what their record is like).

  2. I wonder what those same people would say if they knew they were already paying more than that in expenses used to fund commissions? (I appreciate that I am assuming the providers will compete those expenses out of the product when factory gate pricing comes in.)

  3. “It is not that customers will not pay for advice, it is just that they will not pay unless they perceive value.”

    This is the only statement that really matters from this article. Ignore the headline, ignore the findings, focus on this statement.

    Clients will pay fees for advice, if they perceive sufficient value. If they don’t perceive value, they will not pay fees.

    As Chris says in the previous comment, these people are already paying for advice and in many cases they do not realise just how much they are paying (in both monetary terms and through lack of impartiality).

    An IFA who does not have a strong enough value proposition will fail when they try to charge fees for advice.

    If your proposition is something like “I’m an IFA and I select the best products/funds/widgets from the whole of the market” then I agree – your clients will not pay you fees.

  4. Agree with Sean, it was always obvious, the public do not pay huge hourly rates for anything but solicitors and the low wage earners get assistance with those.

    Regulation and the compensation culture has made our hourly rates sky high and the hours we can actually spend client facing at an all time low.

    With no equivalent to Legal Aid for the financial industry it was obvious all along, but not so clear to a regulator which has an average wage of £56,000 and fits in the income group which benefits most from the RDR.

    It also never ceases to amaze me how a regulator which costs £437.7m to operate and has around 2,800 staff, which equates to around £156,321 overheads per member of staff per year (incl salary), expects an advice firm to run on peanuts, maybe we could take them more seriously if they led by example?

    If they were charging per hour for every member of staff on the amount of hours it is posssible for an IFA to be sat in front of a client their charges would be higher than the highest IFAs listed above, and that is assuming every single member of them was client facing.

    But of course many of those FSA staff are admin and receptionists, PAs etc and will be behind the scenes so charges would be much higher.

    If anyone should know the cost of overheads it should be the FSA.

    Situated in some of the most expensive offices in the country amongst very succesful industry leaders has gone to their heads and they are incapable of connecting to the average income public.

  5. “It is not that customers will not pay for advice, it is just that they will not pay unless they perceive value.”

    @Martin – I agree entirely. The problem for the Industry/Profession is that the public are probably right – very often they do not get value for money.

    The move from commission to fee will not solve this problem – in fact it may make it worse. Already Advisers have a tendency to “activity for its own sake” – doing completely unnecessary work in-order to justify charges. Fee charging may simply make this worse.

    My best guesses for post RDR –

    1) a significant reduction in the number of “Advisers”
    2) a very small minority moving up to the truly
    complex world of advice – Q level 6 minimum with very high fees
    3) an explosion of direct to provider business for very simply products – ISA no initial charge, 1% pa max Multi- Asset – no advice asked for , needed nor given.

  6. IFA’S will be finished, and this goes for all including companies such as towry law. Banks and supermarkets will win hands down. I was at bank yesterday and girl at counter said would i like one of the guaranteed stock market bonds, their are brilliant to boost your interest. Time for a career change and the fsa can stick their RDR where the sun does’nt shine.

  7. 2053 is a very small sample pool, I know plenty of firms who have more clients than that so I’m not sure that this is a very conclusive report.

  8. Surprise surprise – thats pure genius – a muppet could have worked that out.

    The savings/pension/protection gaps aint getting closed anytime soon.

    This really is like groundhog day !!!

  9. Re Martin Bamford and John Blackmore, it is precisely comments like those which have got us in to this mess to begin with, sweeping statements with no statistics or evidence to prove or disprove.

    When challenged one upheld complaint case is held up as an example, or a comment from an adviser who saw a piece of advice once from…..

    I imagine that the vast majority of case sizes are in the value range of £100 to around £450, involve two or three visits from the adviser, so quite where the ‘poor value for money’ statements are based upon I do not know.

    Made up on the spot the same as the FSAs industry problems.

    Now 1 million bank advice complaints that is a figure which is based on reality and nothing being done, just attention diverted to the RDR which addresses nothing.

  10. There’s a surprise! Advisers who have been doing the job right for some time voiced their concerns long ago. My understanding was the Government were wanting to encourage the public to save for their retirement, save for that rainy day and implement insurances to protect themselves and family in the event of illness, death etc and what do we have – a government who has automaticlly excluded over 90% of the public from proper advise! Why do they think the majority of the public don’t have a WILL – because they don’t want to pay for it. The Government want the public to go the Banks as do the EU. Definately a conflict of interest here!

  11. What do these numbers really say?? The current adviser population simply could not advise 100% of the adult population of the UK at any rate of pay, including for free. Not even in the glory days of the direct sales force and home service advisers was 100% of the adult population of the UK advised.
    Not everyone wants advice. Not everyone will pay for it even if they want it. But that’s life and an issue for any and every business.
    No business owner should do stuff for free – unless you take Friday afternoons off to work for a charity.
    And frankly, if you get your systems and processes in order there’s no need to charge anything like £150 per hour – of £75 per hour – five minutes on a calculator will prove it.
    What will kill IFA businesses is IFAs assuming that “the going rate” is £100 – £150 per hour without working out what prices they can offer their services for – and that brings the answers much closer to what ordinary “mass affluent” people are will and able to pay for good quality professional services.

  12. Well well well that’s RDR and the FSA fee paying idea in the bin then!

  13. Asking customers of Aviva would always yield that kind of response. Most of them were probably car insurance clients and have never had any real need for advice apart from getting out of debt and putting £5 a month into a cash ISA.

    Those who wouldn’t pay a fee are likely to be those outside of the target market anyway. Those who need an IFA appreciate the tax savings, investment performance and worries of IHT and paying for care and even if traditionally paying for it via commission are happy to pay fees instead – particularly as it can save them a great deal of money and remove risk of biased advice.

  14. There is nothing fundamentally wrong with the current IFA model. Not all clients need a level 4,5,or 6 adviser but they do need a good adviser to help them through the financial jungle.

    The advice problems lie generally with tied advisers with the banks look at the complaints stats with the FOS. Thats were the FSA need to focus but could there be moral and ethical conflicts if they do?

    I appreciate that there are poor advisers that chose revenue over advice but surely wouldnt it be simpler to introduce a level playing field for products across the board with all providers?

  15. I have been writing to the pinkies for yonks suggesting a return to the Maximum Commissions Agreement which would have stopped all this nonsense about fees/commission.
    It was stopped because the authorities said it was anti-competitive! I am still trying to work that one out.

  16. Why am I not shocked ! What happens with the client who has £2K to put into a Stocks and Shares ISA. Majority of IFA’s won’t deal with the case as the fee would outweigh the advantages to the client. So where does TCF fit in ?

    The client still needs the advice but will rely on decision trees through the bank.

  17. No big surprise is it. Agree with Martin, Ian and John.

    I suspect when everyone is charging fees then unless those who do add value and a good service these will reduce over time as people shop around on cost alone.

  18. Is this really surprising?

    It is up to IFAs to tell clients what the value is and then deliver it.

    I charge fees, I charge more than £100 per hour, I never have a problem.

    Am I unique? I don;t think so.

    Of course the sample may well have been largely made up of people who don’t have the assets to justify big advice fees or enough money to pay fees. These people may well end up in the hands of the banks.

    Can’t say it’ll bother me too much frankly, but they do deserve protection and whilst I”m not holding my breath I hope the FSA pay particular attention to the methods used and the advice given by the banks.

    IFAs aren’t finished, but they will need proper focus to survive.

  19. Sorry Guys.

    Does this all not show that the IFA community is not perceived as ‘truly’ professional by the public (and FSA )at large and thus despite being as qualified as other professions we will continue to struggle

  20. Martin Bamfords comment isinteresting. It would appear that it is our ‘marketing’ and ‘description’ of our services that is the problem indeed he uses the term “value proposition” which sounds like its right out of some swish marketeers mouth and actually means very little. I’ve worked for and with both accountants and solicitors, they have been hugely jealous of our commission structures over the years as they struggle to get people to pay for the ‘value’ of their advice. Indeed they have to employ extra staff to recover the unpaid and pre-agreed invoices for their work. The advice sector will die for a while until there is a massive swathe of complaints after about 5-10 years as the banks ratchet up the charges on their no-advice products and yet again screw the public with the help of the Government and regulator.

  21. A company does a survay & then interprits the responce to fit their own ideals. What it the point of spending policy holders money in this way if you dont listen to what poeple say? Most poeple do not want to pay for advice & have far more important things to do than be educated by IFAs or the FSA as to why they should. RDR & TCF should be listening & responding to our customers views not the bleating of IFAs who seam to think that post RDR there will be a brave new World full of clients who suddenly are happy to pay fees. Get real people otherwise post RDR you will be in for a huge shock. We have to proactivly sell our services. No amount of qualifications will change this.

  22. For the client who has already accumulated their money demonstrating perceived value in tax planning or investment return is certainly achievable. For the client starting their accumulation phase you will never demonstrate perceived value at the rates needed to cover the costs imposed on this industry by regulation and the compensation culture which it has nurtured.

  23. Re David McMeekin, in a nutshell a perfect description of the real state of play.

  24. Who on earth were they asking? People who work in bars paying £20 per month into a stakeholder pension?

    All our clients pay fees and they are happy with it. If you offer a service where clients can see the value they will pay.

  25. Surely you can see that the banks and government are in this together. Common sense says that the vast majority of the population will either do-it-themselves, get sucked into inferior products with the banks or more likely do little planning at all. Consider how poorly equiped in financial planning most people are now.Hows it ging to be when a whole raft of advisers disappear.

    Yes the system is not perfect but there is enough compliance and regulation to limit those that wish to abuse the system.

  26. working within an accountancy firm, thier clients ‘happily’ pay fees. however they balk at paying fees for financial advice! its a culture issue and sadly the general public will go through life with little advice, unless you revert to ‘ my mate in the pub said..’LOL

  27. This survey entirely backs up my own findings. We offer all clients the choice of explicit fees via cheque or for us to be paid via the contracts. 99% of clients choose the latter and we end up rebating commission back in to the contract. I believe that being independent is not about how you pay for the advice but the choice offered. If the consumer chooses to pay by commission and the product does not pay commission it is the client who has excluded the nil commission product not the adviser. At one stage M&S used to refuse credit cards and consumers voted with their feet so M&S now take credit cards. In our Industry the opposit is occuring imposed by the intellectually derelict club. Fees are not all good. My ex partner is a solicitor and once booked 24 chrgeable hours in an 8 hour working day…standard letters sent to clients all with a standard unit rate applied per letter! Clients already have the choice of fees or commission, we have hard disclosure, what is the problem? Why do some people never learn!!

  28. 1) Were those who responded reminded that they currently pay as much or more in commission? 2) Were they told that they could have the fee costed into the product under the RDR? 3) Were they asked if they had any idea what the commission is paying for – parallel with MPs expenses?

  29. Value is one thing. How you pay for services provided is another. CAR (largely) resolves the gap between the two.

    There isn’t much point setting out your stall as a fee charging practice if nobody who might be thinking of availing themselves of your services is interested in being persuaded that fees equate to totally impartial, non-product related advice.

    Not infrequently, we quote fees to get rid of people wanting us to undertake work that we don’t want. Then there’s the other type of punter who expects us to undertake a comprehensive review of all their investments or pensions but then balk at the idea that this will involve a fee, as if we’re some sort of publicly or charitably funded institution with plenty of time on our hands to do pro bono work for all and sundry. GET REAL!

    Most consumers want choice and most consumers choose commission. Those who refuse to offer clients that choice have no right to lecture those who do.

  30. There are some very astute and apposite opinions being expressed within this column. Clearly from those who who have the experience to draw on and have thought hard about their profession.

    The first role of a profession should be to regulate (police) itself I find it disappointing that there appears to be little sense of collectiveness, instances like this show such a broad range of opinion that it is not at all surprising that the FSA seems to be omnipotent.

    My significant concern is that we still appear not to have learned to aggregate and mobilise a consistant appproach to the market and the regulator. We need effective representation.

  31. Surely all this is saying is that charging an hourly rate is not the way forward. We charge a ‘job rate’ which enables the client to decide in advance whether the cost represents good value and, more importantly, enables us to benefit from economies of scale and other efficiencies. It seems to me that the only future for firms charging an hourly rate is the treadmill – any reward for investing in more efficient technologies is reflected in lower charges to clients (due to fewer hours being billed) rather than enhanced profits. Its really not rocket science to develop a set of clear fixed-price propositions that deliver good value to clients while offering the opportunity to increase the bottom line through more efficient operating procedures.

  32. Those clients paying fees will, presumably, keep paying them.

    These consumers are not the problem, it is the non-pensioned and under-pensioned, the non-insured and the under-insured who will balk at paying fees.

    Just meeting the annual running costs of my relatively modest business takes £50,000. An awful lot of fees are needed just to break even.

    Consumers demand the right to choose between a fee or commission process. Given that the FSA wishes to enfranchise consumers one has to question the logic of the new way forward.

  33. As a bit of an observer on this debate, I’d have to say that the debaters seem to split into two camps.

    Firstly there are those who use their real names and put forward an elegantly argued rationale for change. Then there are a herd of dimwits who post anonymously and pepper their comments with spelling mistakes and grammatical errors. It is this latter group’s fervent belief that everything is fine how it is and that they are more than suitably qualified to advise people on the complexities of personal finance despite the fact that they have a qualification roughly equivalent to those sat in High School, while the written evidence here suggests that they are clearly struggling with rudimentary English.

    Frankly, if I needed advice (which I currently don’t) I know who I’d happily pay my fee to …

  34. RDR. Have we not, to some extent, been there before? Remember the 1980’s? Direct sales forces, IFAs, LAUTRO, FIBRA, SIB? Yes it is upon us again.

    Am I worried? Not really. As an IFA my client agrees to my remuneration and in return they know they are getting good quality financial advice and wealth management. However, taking a bigger view of this, the rich clients who can afford proper advice will continue to get richer and the poorer clients who cannot afford or will not pay for advice will go to a direct sales force or bank representative and will possibly be put at risk. The FOS statistics clearly show the risk and cost of bad advice lies with the bank and direct sales forces. The IFA’s share of the costs are piddly by comparison. Why is this? Well most IFAs are self employed or are employed own business owners. They need to ensure their client bank is happy and treated fairly otherwise the whole client bank is likely to hear about it and suddenly their income stream walks away. A bank adviser or direct sales representative is usually employed. Or is a mid to low earner with high commission reliance to meet their day to day individual costs. They have limited access to products and so the offering they can make is very limited. They are targetted by their employer and MI is published rewarding the higher producing sales force. There is pressure and a higher risk of the consumer being treated unfairly.

    So to conclude, should IFAs be worried? I don’t think so. We have already been there before. Fees are just client agreed remuneration which may take the form of commissions. Any reputable IFA is already there.

    I just feel sorry for the FOS. I hope their business plan going forwards includes raised fees for the Banks and Direct Sales outfits and more staff! They will need it!

  35. My view is that there is enough accumulated wealth and need for advice in the baby boomer generation to keep well qualified and experienced IFAs busy for the next 20 years or so. The debate over fees in this segment is mainly to do with adviser mindset and a lack of confidence (possibly justified) in what they bring to the party.
    My concern is how the nation will build the next mass wealthy generation, as the general attitude to saving has changed over the last 20 years, and we have seen a demise in decent pensions at a time when people need to save even more. Huge challenge, and I don’t think that any body has really got on top of this.

    Oh, and I believe the RDR is about nothing other than protecting providers from their own flawed business models.

  36. What this proves is that intangibles are sold and not purchased. You can’t fee charge for an intangible product or service to be paid for an event yet to occur. Its like going to a solicitor and paying for divorce yet to happen and if you conducted a survey and asked consumers how the feel about paying a solicitor for an event yet to occur you get the same results as AVIVA get. On the other hand go to a widow or an orphan or a retired pensioner struggling on a pittance of a pension and ask him to enhance his pension fund for a fee and hey presto he will say of course.

    The FSA is not fit for purpose!

  37. When on when will the Government learn that the advisers they use do not live in the real world.
    The majority of people will not get advice with the RDR proposals. They do not choose to spend money on the products covered, they are informed by advisers and persuaded of the benefits, so to expect them to pay, what to them is a lot of money, for advice they don’t feel they need is stupidity in the extreme. We had free financial advice to all before this government arrived, and slowly but surely it is being eroded till in the end only the rich will have advice. With legal matters we have legal aid, are we going to have aid for those that can’t afford an adviser.

  38. I’ve just done my own research into this – and the tragedy is that consumers get the best value when they use an adviser, however they pay them. But there’s a lack of understanding and trust.
    A lot of people in the industry seem to adopt an ostrich approach, think they know all the answers, stick their head in the sand and hope things will return to the good old days. It ain’t going to happen and only the best will survive the changes currently sweeping through the industry.Tough times call for new approaches. Start by asking some searching questions about how you present yourself and, for goodness sake, take time to understand your audience and the world they live in. Sorry if this sounds patronising!

  39. Just to be clear – this was an independent survey of consumers, not Aviva customers (although some of those surveyed are likely to be Aviva customers) so the results have to be taken seriously and the sample size is big enough to be statistically valid.

    This research reflects the public’s long-held and in most cases still-held view that financial advice is free (I do wish that IFAP would stop their half-hour consultation free promotion as it perpetuates this myth).

    I have been moving my business to a fee-based model and the biggest resistance has come in terms of clients having to write cheques. They hate it. Some of them have made us wait a long time to be paid. I’m an IFA, not a debt-collector!

    So, most of our income still comes from commission (agreed with the clients in advance in the spirit of CAR) and I imagine that this will continue post 2012.

  40. Alan Munro:
    “Frankly, if I needed advice (which I currently don’t) I know who I’d happily pay my fee to …”
    This is one of the challenges – Alan (who I suspect is typical of the majority) wont agree to pay a fee until HE knows he needs advice – but I imagine that if he sat down with 100 decent advisers, most would come up with a sensible way of improving things for him..we dont know how important or how beneficial until we find things out, but we need paying to do the looking, even if we find nothing!

  41. No surprises there then. Insurance companies are not a good guide for financial advice.
    My practice has been fee based for almost 30 years and I am glad to say my clients are happy to pay fair fees for fair results. If they had not had that they would have all gone away by now. In fact the reverse is true; I continue to take on new clients.

  42. OPEN LETTER THAT I EMAIL TO STEPHEN GAY.

    Hi Stephen

    I know I’m banging on about the same old subject.

    Aviva director of distribution development Stephen Gay says “the research shows that the nature and value of advice is not well understood or appreciated by customers”.

    What’s the point of conducting research if you take no notice of it? Winston Churchill said ” every man must retain the right to be wrong”

    Who are you to decide what the paying customer MUST get for his money?

    I have taken on clients from fee based IFAs because the fee based IFA was creating work for no benefit for the client, getting a member of staff to do it and then charging at his hourly rate.

    Client are always contacting my office to find out their portfolio value stand at, which we do at no charge, yet under your system I would need to charge minimum £80 + vat.

    You don’t understand this industry because you an not customer focused. This is my 30th year in this business, I talk to client each and every day, I know what they want, so please Stephen listen and learn.

    Let’s hope you get thast dream job at the FSA that you must be after.

  43. We do not need a survey to tell us that the majority of clients are not prepared to pay fees. Simply go and ask your own clients and they will tell you that rather than pay you for advice they would rather spend the money on a new TV or a holiday. The industry needs to look to why commission was first introduced. Quite simply the industry realised then that clients won’t pay fees and taking the fee out the lifetime of the product as commission was clients preferred route.
    What I don’t understand is why the FSA have been allowed to introduce these changes this time around when in 2003 their attempts to change into ‘fee based’ advisers was rejected by almost all in the industry? Could it be that after 9 years where the Insurance companies have affectively paid our commissions, they have realised that this is their time to make money and therefore they have not fought as hard. Or is it simply that the FSA have decided to simply ignore all attempts to stop it.
    I personally don’t believe that the vast majority of clients will go to the bank for advice, they will either turn to the internet or simply not bother. Then we will see how big the pension gap becomes!

  44. We moved over to fees and adviser charging some time ago. However, some of the responses from the fee only firms amaze me. Don’t they realise that when they talk about their own clients being happy to pay fees they are surveying a self selecting group – who are happy to pay fees. What about the rest who are not their clients and never will be because they won’t or can’t pay their fees. The RDR, if adopted as it stands, will restrict access to financial advice for the majority of the population.

  45. Anonymous is wrong if he/she thinks 2053 is a small sample size! some of the politics ones on newsnight etc…are in the low 100’s.

    In terms of a survey this is a reasonable sample and from a respected pollster like ICM can’t be ignored.

    It’s hard enough to get anybody to actually participate in any survey for financial services they usually run a mile – nuff said.

  46. Thank god I retire this year. Especially when I see the “fat cat” comments like “who were they asking, people who work in bars paying £20 pm into a stakeholder pension. I’ve got news for you matey. The majority of people who need advice fall into this type of “bracket”. Not everyone can afford upfront fees, nor do they want them if they are taking out “small” life policies or “small” investment/retirement plans. Of course there should be fee options but the commission option should also be there. Like another poster I have also come across the rubbish non-service given by fee charging advisors also charging monthly servicing fees with NOTHING being done for the client.

  47. There is room for fees. I think it is certainly important how this questionaire was worded. Yes certain people do not perceive value in anything and have spent too long in an environment of getting any sort of advice for nothing. The banks are the main reason for this, using their huge resources to sell low end, mediocre, volume products (that would be completely unprofitable to the average IFA) to distrustful, ignorant investors, looking for a perceived cheap bargain (like they do with their motor insurance) who simply dont know any better. If a potential client cannot perceive any value in dealing with a professional adviser, then I personally do not wish to deal with people like this anyway and they simply deserve what they most surely will recieve!

  48. anonymous again..that would be “the Government want the public to go to the STATE OWNED banks..”.!!!!

  49. could we not have a calculation of how much of the hourly rate is spent on regulation, the public would then be able to see just how much the rampant over regulation of financial services is actually costing them.

  50. It makes you wonder which socio-economic group they surveyed. Our clients love the fee approach as they know they get totally impartial advice. Fees are not for everyone I agree, it is all about value for money

  51. As an IFA who has only recently started in business, having spent 25 years in the tied sector, I get annoyed by the “I’me alright Jacks” who service the minority top wealthy clients and tell us to be quiet. The clients I have been helping to date are ex bank clustomers (not wealthy by a long shot but make up the average guy in the street) who have been paying well over the odds for products I can access much much cheaper, and they get a more friendlier, honest, professional service which they do not get from their bank adviser.

    An adviser by the way who seems to change quite frequently due to not hitting their targets.

    Why have we not got a body to stand up for what we represent ? why are we being railroaded by the banks and their buddies the FSA? why are the poorer members of society being herded towards the banks ? ( well obvious that one ) but tell me how the hell can this be called treating customers fairly ?

    These people I serve all agree on one thing and that they would not pay a fee upfront, so if i incorporate it into the product post RDR what is the difference ???

  52. Fiona Sutherland 21st January 2010 at 1:06 pm

    Are you a product pusher, order taker or adviser? What you believe will influence how you respond to this research.

    Whatever happens IFA’s are flexible. Now is a time more than ever to identify your target market and research (not ASSUME) what they value. Simplify systems and processes, gear marketing communication, service proposition, promotion and CPD to deliver as cost effectively and smartly to your target market.

    Pick product providers who help you add value not get in your way. Ditch compliance support if it’s not working with you, delegate what others can do more cost effectively to free you for income generating activities. Don’t sell on price and get the message across that you are as qualified and knoweldgeable as lawyers and other professionals who charge a lot per hour.

  53. A question to fees advisers

    Am I right in thinking that once your total fees you charge exceed the limit for VAT you have to start charging VAT?

    If this is correct then I can see that HMRC/Darling are all for fees. 17.5% etc income to Treasury.

    I discuss my charging options with existing clients and potential new clients and get mixed views on the fees issue. I happily charge fees but do not charge any way near the level of fees outlined in the above responses.

    Yet most clients still want to charge the cost of my advice to the contracts as cash flow is generally tight.

    So CAR will work for me and my clients and see no issues there.

  54. I also feel that most people in the street feel that if we work 45 hours a week for 52 weeks of the year at £150 per hour, the assume we are generating £350,000 of profit. Only face to face work is done at the top rate. Lower rates are paid for Paraplanning and Admin work. Should we not be rewarded for top class service, £1,000’s of tax saved and not to mention having to cover our massive overheads like PI, compliance, software, salaries etc….If w charge a fee, we do not take commission on Life policies or PHI policies…this means further savings for our clients….if we can’t add value, we don’t take them on as clients…It all boils down to on simple question….do you want advice or would you rather I sell you a commission bearing product?

  55. I find the commentary which has followed more interesting than the article :0) Thanks to Money marketing for throwing the cat amongst the pigeons again.

    The divisions within our industry are astounding and we will never be able to add ‘perceived value’ to clients unless we all work together in developing and improving their understanding of why and how we truely do add value.

    We need more focus on conusmer education rather than continuing with this slightly pointless ongoing debate.

    Fees are coming whether you like it or not and its time to ‘get busy living or get busy dying’ the choice is entirely ours.

  56. so there we have it. 6 pages of comment distilled down to the conclusion that
    1. It is the FSA who suffers from envy and jealousy as far as how we are remunerated. They just cannot stand it.
    2. This business is like shooting ducks at a fairground whilst sitting on a bucking bronco. Nothing stays still for very long; polarisation, depolarisation and all the rest of it has come full circle in less than a decade. Trust legislation this year will be different next year as it changed this year from last. How can one possibly pull together a lifetime strategy for an investment client on that basis.Who suffers? We, the IFA do. The Client does. The FSA? Nah, because they are not INVOLVED!

    3. I do a large amount of protection business. The FSA have a complete and total absence of knowledge of this area, hence their reluctance to regulate an area that is undersold. Which is fine by me. What the FSA cannot stand is market forces and that includes practices who can see RDR on the horizon and decide to convert to a protection practice. IHT planning? JLSD WOL products. Easy, flexible and RDR proof.
    Let the protection Golden Goose keep on laying eggs I say.

  57. I must confess that when I give investment advice I prefer the advice cost to come from the product. The reason is simply that when a client looks at his/her investment valuation what they see in front of them is the net result. £100k invested current value £120k net of all costs for advice. Nice and simple. Charge explicit ongoing fees etc and the whole thing gets confused. £100k invested plus advice fee plus quarterly advice fee..working out the actual profit is difficult. Also if the advice charge is wrapped up in the product the eventual encashment value is lower thus less tax is payable. The advice fees can not be offset against the surrender proceeds. No one makes these points ..just the usual about VAT which is also valid.

    Lastly people post annonymously solely because they wish to express their view honestly without fear of an unscheduled visit from the regulator for daring to oppose them!

  58. Funny, those for the RDR and therefore with the FSA complain about those who are against not giving their names!!

    If they cant work that one out no wonder they think the RDR will work.

    After being at FSA meetings and the FSA obsessed with getting people’s names, making sure there are no ‘outsiders’ (who are they expecting, the KGB?) doing a good job about getting their speech over with then rambling on as much as possible until time is up over the important issues or questions raised by those present, it is hardly surprising that people wish to keep their names hidden.

  59. What percenage of the same people would volunteer to pay £1,000 per hour for the head of the FSA?.

    How many realise that a large part of what they pay for their IFA goes to pay the FSA?

  60. I still think the solution is simple. The FSA should segment the intermediary community into

    a) independent financial sales (paid by commission, broad based educational and qualification levels and with a bit of advice bundled into a product recommendation) and;

    b) independent financial advice (fee/adviser charging and providing advice and planning services with higher qualifications)

    Make sure that the consumer knows the difference and what they might expect to get and problem solved

  61. I think some people have missed the point of consumer research – asking your fee-paying clients if they’re happy to pay fees will net you what you want; asking the general public will get you the response outlined above.

    The value of advice and the nature of adviser remuneration is NOT well understood – if it was, we’d see a very different industry today.

    The challenge, as eloquently pointed out in the article, will be in making these clear to customers. Here’s what I can offer, and this is the value to you.

    It’s clear that many people are already the masters of this, in making their fee models work – the challenge will be in converting the rest; and in helping our customers through the transition also.

  62. hmmm, perceived value.
    i) those dealing with complex advice areas can more easily demonstrate value
    ii) those areas are more likely to be an issue for HNW

    as such, what we all knew from day one – anyone not HNW not only cannot afford advice from 2012 but wouldn’t be willing to pay for it even if they could!

    despite being RDR qualified, the majority of our clients are ‘normal’ ie made up from the mass working non-professional populous.. as unlike some of my ‘peers’ i am not willing to forget where i came from and what type of client built our business

  63. I wonder how many in the industry know what the size of the financial advice market is and how it breaks down – the advised (professional and non-professional) and non-advised segments. This seems fundamental to debating the issue. For the past 3 years ComPeer/JGFR (using a representative sample of the UK population commissioned from GfK NOP) have produced a Financial DIY report that highlights that only around half the adult poplulation have a financial adviser as such and among those that have a financial adviser 27% regard an IFA as their main financial adviser followed by friends and family (25%).

    In recent years more people have elected to become non-professionally advised and go online which is where the really interesting industry developments are taking place – and makes the RDR debate from a consumer perspective largely irrelevant.

  64. re: Phil “despite being RDR qualified, the majority of our clients are ‘normal’ ie made up from the mass working non-professional populous.. as unlike some of my ‘peers’ i am not willing to forget where i came from and what type of client built our business”

    hear hear!

  65. the FSA monitors these blogs, as they have previouly confirmed to me.

    One therefore hopes that the sentiments expressed st strongly are being relayed to the decision makers who appear to be isolated from the views of ‘ordinary’ advisers.

    Can I ask that all of the bloggers respond to the Consultation paper making their position known.

    Also, whilst it is easy to knock any proposal the secret to any successful lobbying process is to explain exactly why a proposal is inept and additionally to put forward an alternative plan.

  66. As a member of the general public reading your comments you seem a long way away from a profession. You dream that you all deal with the elite welathy individuals whilst some like “Phil” remember about treating people with dignity.

    Be honest with yourselves, you are all salesmen. Nothing wrong with that but the route to absolution is through acceptance. Some of the sharper of you have worked out you can sell fees that are higher than you can derive from the commssion on products.

    You may give good advice but please don’t try to tell me how you derive your income makes your advice better than others with equal or purer ethics.

  67. Anon, I agree with you even though I am a ‘servicing’ type of IFA, it is a sales job even if we do give good advice.

    Only businesses with massive old (sales) client banks and less advisers, or lucrative ‘contracts’ dont have to ‘sell’ as such, however they dont really look after all of their client bank properly either.

    Most of us realise it, the rest try to forget it!! Or they are so far from the coalface they are out of touch.

  68. in response to “Anonymous | 21 Jan 2010 10:06 am” who wants to leave the industry due to RDR, good, you need a certain level of intelligence to obtain the exams and to give quality advice. Based on three basic errors and one insult in three sentences may lead to some to question the quality of your report writing ability. Once that’s questioned you’re on a slippery slope…….
    I wish you luck with your career outside of financial sevices.

  69. A sales Manager of mine a long time ago said to me that One Salesman creates twenty jobs.

    Yes we are all salesmen and saleswomen – this applies if you are an IFA, an accountant, a solicitor, a Barrister or a marketing consultant. We all sell a service.

    I offer fees (despite having no wish to be a VAT collector for the Govt.), some of my clients who run their own companies pay fees and offset them against their bottom line profit as I give some business advice also.

    The majority of my clients pay by commission. I take a flat 3% initial and 0.5% fund based renewal on all lump sum business and 75% of Lautro on all regular premium business and find that this covers the full gambit of advice I give my clients.

    They see the benefit to them with increased allocation rates and reduced monthly premiums or reduced Management charges.

    This and my business model manages to treate all my clients the same and I trust fairly. I disclose all these things to my clients, they understand what they are paying for and what they are getting. They ask me questions and I believe that on the whole they trust that I am trying my best to do the best by them.

    If I don’t get it right then I see them and have a plan to try and improve things (active servicing I think it’s called).

    Please tell me if I’m doing it wrong – yes we are all salesmen and women but I feel the majority of us sell with trust, sincerity, honesty and the best interests of our clients (they are afterall our bread and butter and can vote with their feet) at heart as does my wife who is a Solicitor.

  70. The general public used to being pushed products by salesmen will never ‘perceive value’ as they have always perceived an advisor to be someone who only gets paid when they sell something. Just look at job adverts for advisors – ‘a strong sales record required’, no mention of professionalism e.t.c. If the advice industry is to be taken seriously, we all have to be seen as adding value, knowledgeable by a great deal more than our target clients and in a position to quantify our worth to clients by putting a price tag on the advice that we give i.e charge upfront fees. I know not of any professional who when visited by a client, the client expects to walk away without paying a fee. If you have to use trickery to make someone get advice from you, that person will obviously not pay. I totally support the RDR, commission on all financial products should be banned. All advisors must charge fees, that includes mortgage advisors. Level 4 should be for straight forward cases. For the more complex cases, minimum should be level six, more like in the accountancy profession where most work has to be signed – off by a chartered accountant, not trainees. Everyone who is not chartered should be classified as part – qualified and thus a trainee, it doesn’t matter how many donkey years you have been misselling financial products.

  71. London – well said!

    Absolutely spot on. Those who can’t even get to diploma level should simply stop advising and leave the industry as this is becoming a profession.

    It will happen – in a few years, you will have to be at QCA level 6 to be able to give advice.

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