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Research reveals what consumers expect to pay for advice

Many clients currently believe there is no cost for financial advice and would only be prepared to pay £155 for a comprehensive financial review, according to research from CoreData.

The research and consultancy firm polled 1,020 consumers to gauge their appetite towards paying fees for advice and how much they would be prepared to pay.

Of those polled, 44 per cent have never used a financial adviser. A further 29 per cent have used an adviser in the past but do not currently receive advice, while 27 per cent use advisers on a regular or occasional basis.

Out of the clients who see a financial adviser, four in ten do not believe there is a cost for the advice they receive.

The research shows that half of consumers polled who are not currently receiving financial advice on a regular basis would consider using an adviser, but would only be prepared to pay an average of £155 for a financial review.

A further 10 per cent of those who would consider taking financial advice would not be prepared to pay anything at all.

If charged on an hourly basis, consumers would be prepared to pay an average of £39 an hour for advice.

CoreData head of UK and Europe Craig Phillips says: “A key challenge for advisers is in gently articulating the cost of delivering a full financial plan. Clients need to appreciate advice is much more than just the face-to-face time with an adviser.”

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Comments

There are 29 comments at the moment, we would love to hear your opinion too.

  1. The report doesn’t differentiate between independent financial advisers and bank advisers.

  2. Blimey…£39 an hour..I fill my car with that in about 30 seconds..

    There does seem to be a disconnect between what advisers think they are worth and what the consumers believe is satisfactory, and no exams or letters after the name are going to put that little problem right.

  3. Somebody ought to tell the regulator about this. Who is going to pay their fees and salaries if half the advisers can’t make a living ? Have they got a Plan B, do you think ? Perhaps a quarterly levy will be required.

  4. Perhaps the FSA should have done this survey before they started the RDR. Maybe they would understand that the public is not prepared to pay upfront fees for advice.
    So much for we have been listening to the public and ” This is what the public want”

  5. .. at that hourly rate, I wouyld need to work for about 2 months solid just to pay the firms’ PII premium and FSA/FSCS reg fees!!

    As stated above – something’s not adding up

  6. Brilliant £155 and the FSA think the RDR is a good idea.

    The industry is hovering over a precipice and reports like this only show how out of touch the FSA are.

    11 mths 13 days to doomsday

  7. This is precisely what you would expect from a public that has no understanding of the costs of services (not just financial services).

    It is impossible to educate everybody on the costs of every service they receive, no matter whether that is from an IFA, a plumber computer technician or a nurse. In our sector what should be important is the value to them, not what an IFA gets paid. If they want a two bob service they will probably get poor advice. If they are willing to pay a proper amount to an adviser you would expect them to do well over the longer term.

    If you want to put people off looking after their finances you continue to hilight what an adviser may earn from a particular investment, for example, and the media will always select the most profitable ones, won’t they. Negative advertising from the media and the regulators are doing the public down.

  8. mmmmm?

    We have been fee based for 2 years and our clients seem happy to pay fees. Most of our fees are fixed price, but reports etc get charged internally at £150 per hour. What clients think “advice” is free-advisers (the industry?) needs to explain the effect of commission and compare it with reasonable and moderate fees. Above all, advisers need to deliver a service clients want and NEED and here is the problem. Most people don’t need us! We still have the option of commission for life and mortgages so just structure your model to yield a profit.

  9. How many people buy a product, not a financial product, because they see the word ‘free’? Yet those in the know, know that it’s not free, just built into the price already. And so it has been with financial advice but it wasn’t advertised as free because it wasn’t, yet that is the perception.

    So yes there is big hill to climb, but in time client’s will learn that the price is worth paying, but only after they realise the options are poor quality and value, and a little more mis-selling?

    £39 per hour or £155 all in? I better cancel the order for the new BMW and buy a Hyundai instead!!

  10. We’re done for if that’s what people think advice is worth. Isn’t this the sort of survey that should have been done before RDR was brought in?

  11. The FSA know this, its all part of their greater plan to be rid of us!

  12. Are any of you guys surprised by this? Well quite frankly I was because I’m surprised they got an average as high as £155! Before anyone has a go I’m a 30+ year IFA but firmly believe that fees will NOT work for middle Britain, which is basically where 99% of yours and my client live!
    Wake up guys …….. it’s over unless you already run a Chartered Practice and deal with the HNW community.

  13. Hector Sants walks into FSA and says I am outlawing salaries as they show a bias towards one employer whereas you know I also am in talks with the BofE and Government over my next job. I will be sending you my invoice for £39 per hour. However I do a lot of hours per year so the invoice will be for £750;000,
    Nice work if you are smart enough to get away with it? How much longer can u do this Hector?

  14. As has already been mentioned, not even enough to cover the regulation plus PI fees.
    Consumers need educated on how much it costs an adviser just to open up the door in the morning.
    Ask your clients how much they earn and ask them if there are any aspects of their work they would be prepared to undertake for free.
    I agree with setting out costs but I also think documentation should include information on the high cost of regulation so that the clients are aware that the adviser must pay out a great proportion of what is charged.
    Mind you, we are getting to the stage where, if the regulator continues to grow many more legs and arms, we may as well lie down and die.
    What about “witch” magazine doing a piece on the cost to an adviser of giving advice. Pigs might fly.

  15. The RDR does not require any consumer to pay fees. Adviser charging works in the same way as commission in that it can be deducted from the investment product (where there is one). Why pray do so many people keep suggesting that the RDR requires clients to pay fees?

    If the research agency started by asking what level of fees a consumer was prepared to pay for financial advice because they believe the RDR requires consumers to pay fees then perhaps it says more about the lack of knowledge of the agency than it says about the consumer.

    And the final comment in the article that clients need to understand what the financial advice process consists of is so true. Some IFAs have a proposition that clients will be prepared to pay for and some simply do not.

    This is not in reality about consumer perception of price but about the ability or lack of ability of IFAs to explain why clients should pay- in other words it is about value proposition or not

    I also wonder why 40% of consumers believe that financial advice does not cost them anything. Could it be that they have been told at some point that “commission” was a no-cost option to them?

    Can we please have an article based on the reality of adviser charging and not a perpetuation of the myth that the RDR requires clients to pay fees?

  16. Derek Bradley ceo PanaceaIFA.com 18th January 2012 at 5:01 pm

    Very interesting, watch out then next week for PanaceaIFA “Sants”survey results

  17. Of course clients don’t want to pay for advice and its only on planet RDR and in the heads of the FSA that this happens. Stakeholder pensions proved this. The government removed distribution costs and forgot that this would also remove distribution. However, it matters not what we say or do because we live in an elected dictatorship where Mark Hoban MP is a duplication of his Labour Party forebare and the FSA is above law, parliament or even reason!

    It is unwise to pay too much, but it is unwise to pay too little. When you pay too much you lose a little money. That is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.

    John Ruskin 1819 1900

  18. Ancient Wisdom...is a IFA in N3 18th January 2012 at 5:37 pm

    Watch the list of networks that will collapse after RDR.

    There will be bloodshed – no one wants to pay for advice – thats the truth.

  19. Nick’s quite right – there’ll be few cases where a client will actually need to write a cheque. So, as long as we’re adding value in excess of the fee/CAR, it shouldn’t be a problem.

  20. @Nick. You are quite right re the advisers not being required to charge fees BUT the research does seem to support the view that advisers value themselves more highly than the majority of the public.

    The amounts that advisers have earned to date have pretty much been hidden. If RDR finally lets the public see what they are paying then there will be problems. My guess is that CAR at a creative Industry will continue to muddy the waters. Now if real fees were required – cheque from the client to the Adviser – that would, indeed, be more interesting.

  21. Comparing £39 per hour with past commission income is not the basis of a comparison.

    £39 per hour is £760 per week of chargeable time, about £39000 per annum, less overheads.

    Plumbers £20-30 per hour – £40000
    Post grad lawyer £30,000 pa starting
    Post grad architect £25,000 pa starting
    Policeman £29,000 starting salary

    Financial adviser with basic minimum level 4 qualifications under RDR £39000 pa ?

    Is it that bad, well it is compared to the ridiculous commission income many of us have enjoyed over the past 30 years – its over Wake UP.

  22. Anyone ever though that the £39 is what consumers see as the value they are getting? So rather that wallow in the fact that people don’t value what you do, wouldn’t it be better to do something about it?

    Probably not, eh?

  23. Damn lies and statistics? The big question is who the sample group of 1020 relates to. It is obvious that a high proportion of consumers will never pay fees, and going forward under RDR they will be ‘serviced’ by the Banks and direct sales forces.
    If IFAs recognise that fact and offer services to those individuals who are willing to pay fees, they will prosper both before and after RDR. However, those who do not adjust their business models will undoubtedly fail. It is sad that we will see consumers driven further towards non advice routes, but if we are serious in making financial planning a profession, we must alter our mindset to reflect those of the professional services such as Accountants and Solicitors.

  24. My garage (main agent) charges me £85/hr + VAT to work on my car. Were I to propose an hourly rate of £39, the response would be a polite but firm refusal ~ this is what we charge and if that’s unacceptable you’ll either have to go to some back-street hole in the wall place or try to do it for yourself. Your choice.

  25. Statistics as usual.

    £155 is how much people who have not had advice before would pay. In other words those who have not used an adviser before.

    The £39 per hour is not clear as to what the 10% is a proportion of.

    40% of those who take advice think there is no cost.

    let’s face it the consumer is pretty stupid, but then who’s fault is that?

    Genetics or the misleading impression some advisers like to propagate?

    My form has zero problem charging fees.

    So you have a choice. Give up on the grounds of a pretty small and rather shoddy bit of public opinion research or follow those who do that which you think is problematical, with no great difficulty.

    Ian Coley
    Partner
    Medical Investment Services.

  26. The findings of this survey should come as no suprise to anyone.

    The needs of the average consumer can be covered with an ISA, stakeholder pension and some protection cover. All of these products have become comoditised over the years with various institutions trying to sell them to consumers by any means possible. Add to this the fact that the banks appear to offer free advice and it is no wonder that people do not wish to pay a realistic rate for financial advice.

    The fact of the matter is that most consumers view the financial services sector as a necessary evil and the less dealings they have with them the better as far as they are concerned.

    Financial advisers need to demonstrate the value that they can add to the lives of consumers and then people will be willing to pay. However, it is unrealistic to expect everyone to be willing to pay the kind of fees that financial advisers expect to charge and as such advisers will have to target market their services.

  27. One of the many negatives of the RDR is that the consumer will believe that everything has a fee cost. This is partly due to loose reporting, partly the down-the-pub gossip and partly because we will all be charging more frequently as a result.

    Protection and mortgages are exempt but many consumers will avoid advice in those areas due to a fear of some chunky fee heading their way.

    The real error of this is that when investment/pension plans had an automatic commission structure it enabled us to prospect with the implicit knowledge that the client would not have to discuss cost. Like it or not most clients do not like discussing cost.

    With adviser charging it is much more difficult to prospect for new clients. The introduction of Stakeholder provided this beyond doubt.

  28. Wake up and smell the coffee you ifa's 22nd January 2012 at 11:59 pm

    The trouble with you lot is that you continue to divert the core issue , instead of winging about the Fsa perhaps you should hit the panic button to ensure you have a viable business beyond your soon to diminish trail book. Consumers won’t pay since they don’t value what you do and couldn’t give a toss about how much it costs you. Let me put it this way just because the rents are high doesn’t mean customers will shop and pay more on the high street, the go online or in malls where the proposition is better..yes you are all headed for the same future as peacocks or woolworths, sure some of you offer a harrods type service and you will thrive , but like harrods that will be a small minority. Mr Lakey et al..Kapish?

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