The article in Money Marketing last week headlined, Comm-ission to visit the land of the fee, tells us that IFAs who have turned to fees have done so as a marketing tool and to ensure they are remunerated for the work they carry out.
The article neglected to explore a third reason, namely that a large number of clients are better served by working on a fee basis.
To be specific, a client with a large amount to invest in trustee investments would have paid£18,000 in commission based on full commission terms but received comprehensive investment and tax planning advice for£1,800. There is therefore a directly visible financial benefit to the client when working on a fee basis.
There are some clients I have met who have felt obliged to effect a 10-year endowment so that their adviser could earn something from the advisory (?) process which would otherwise have yielded nothing.
There is a directly visible financial benefit to a client who should not feel obliged to take out a policy so that the adviser earns something rather than nothing.
This does not mean that clients have to pay a fee. In fact, in the case of the trustee investment, it was better to receive the£1,800 via commission rather than by fee as the beneficiary would have been deemed to have received income equivalent to my invoice had the bill been paid by the trustees.
When this discussion is focused on the benefit to the client and we are able to explain and quantify how they may be better served by a fee-based approach to their finances, then clients may be more willing to listen to what we have to say.
If you persist in framing this debate purely in terms of how fees suit advisers, making sure advisers get paid and as a marketing tool for their businesses, then clients will naturally fail to see how they are served by this new approach and they will have further proof, if any were necessary, that everything that goes on in financial services is for the sole financial benefit of their adviser and not them.
Professional Partnerships Independent Financial Planning,