A gap is emerging between what consumers expect to pay for advice and what advisers need to charge to be profitable.
Research from CoreData found that 8 per cent of the 1,020 consumers polled have an ongoing relationship with an adviser. Excluding that 8 per cent, just over half would consider using a financial adviser and would be prepared to pay £155 for a comprehensive financial review. Ten per cent of those who would consider taking advice would not be prepared to pay anything. Consumers felt that four hours was sufficient to carry out a financial review.
Of those who would consider using an adviser, 20 per cent say they would prefer to pay their adviser through an ongoing charge taken from the product, given an example charge of 0.5 per cent a year.
Respondents say they would be prepared to pay an average of £39 an hour for advice.
Twenty-six per cent would prefer to pay an up-front charge taken from the product. The remaining respondents preferred to pay an up-front fee directly to the adviser.
Separate research from Pana-ceaIFA suggests a lack of understanding among some clients about how advice will change after the retail distribution review. Asked if their clients understand they will have to pay for advisers’ services after 2012, 40 per cent of the 740 advisers polled say clients know but may not understand. Forty per cent say their clients do not understand they would have to pay.
Many respondents feel they need help in educating their clients about the impact of the RDR, with 60 per cent supporting this view.
Advisers rated face time spent with a client and experience as the factors they believe clients valued the most.
Only 9 per cent of advisers rank value for money as an important factor for clients and just 1 per cent feel qualifications are valued by clients.
Asked about their business model after the RDR, 66 per cent of advisers say they will be independent while 22 per cent say they will be restricted. The remaining 12 per cent are either undecided or are intending to leave the industry.
Thameside Wealth director Tom Kean says: “I can understand the figures consumers have come up with but they are just not realistic because of all the costs involved in running an IFA practice.”