In a special report on the RDR, the ratings agency says the fact customers will be faced with explicit fees for investment advice will drive some
away from the IFA sector.
Senior director for insurance David Prowse says: “Customers will be faced with explicit, direct fees for investment advice – something they may currently perceive to be free because charges are somewhat hidden within premiums.
“We believe that the new transparency will drive some insurance customers away from the IFA sector and towards cheaper, restricted advice or no advice at all, and pension savers may be less likely to exercise their open market option when converting their savings to an annuity at retirement.
“Although most annuities should be easy to compare, some customers may not be aware that they can easily look for a better annuity deal themselves, without having to consult a financial adviser and pay the charges that this would entail.”
Fitch believes the switch to adviser fees should end commission‐driven sales and in theory increase trust in advisers. But the firm does not expect this to be a significant outcome in practice, given many consumers’ scepticism towards financial services.