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The death of bank advice? Axa says it needed 6% adviser fee for profit


Axa says it would have had to charge a 6 per cent advice fee in order to deliver advice profitably as Ernst & Young warns bank advice has a “very limited” future under current regulatory rules.

Axa’s decision to close its UK bancassurance arm this week, resulting in 450 job losses, makes it the latest high profile firm to exit mass market advice following similar moves by Santander, Lloyds Banking Group and Barclays.

An Axa spokesman says: “In the advisory part of our bancassurance channel the advisers, as a standalone entity, have to be profitable in their own right.

“In our model, the overall cost of providing financial advice is around 6 per cent, but the advice charge is 3 per cent. That is why the model is not profitable anymore.”

Ernst & Young financial services division director Malcolm Kerr says: “It is clearly proving exceptionally challenging for vertically integrated firms to have an advice model that stands on its own two feet. Traditional face to face investment advice via bank branches has a very, very limited future.”


Legal & General, which covers 87 per cent of the building society advice market including Nationwide, says it remains committed to the bancassurance model.

Skipton Building Society, HSBC and Royal Bank of Scotland also say they will continue to offer face-to-face advice, although the two banks’ services are geared towards high-net-worth clients.

Labour MP and Treasury select committee member George Mudie says: “There was always a risk the RDR would lead to advice being withdrawn for ordinary people, and that is what is happening. The question is, are the Government and the regulator alive to what is happening and prepared to look again at the rules?”

A Financial Conduct Authority spokeswoman says: “We are monitoring the retail investment market as it evolves and will consider whether we need to take any action, including rule changes or guidance, ahead of the post-implementation review in 2014.”

Atkinson Bolton Consulting director Simon Gibson says: “If banks cannot achieve the economies of scale needed to deliver mass-market advice profitably, how can the smaller firm have any hope of achieving this?”

The closure of Axa’s bancassurance arm, which offered advice through Yorkshire and Clydesdale Banks and The Co-Operative Bank, follows Santander pulling out of investment advice last month. The move by Santander led to 724 job losses, with 150 staff kept on to look after existing customers.

The number of bank advisers as at 31 December was down 44 per cent on December 2011 figures according to FSA data, from an estimated 8,658 in 2011 to 4,809. Overall the the total number of retail investment advisers fell 23 per cent from the 40,566 estimated by the FSA at the end of 2011 to 31,132 at the end of 2012, the first day of the RDR.




Ricci and Kalaris to leave Barclays

Barclays head of investment banking Rich Ricci and wealth management chief Tom Kalaris are leaving the business. Ricci and Kalaris, who played key roles under former Barclays chief executive Bob Diamond, will leave the banking group on 30 June. Barclays has appointed Eric Bommensath and Tom King as co-chief executives of corporate and investment banking […]

FCA charges eight men with land banking fraud

The Financial Conduct Authority has charged eight men with land banking fraud and carrying out a regulated activity without authorisation. The offences relate to the period between August 2008 and November 2011 and arise out of Operation Cotton, an FCA investigation into land banking firms. Scott Crawley, Daniel Forsyth, Ross Peters, Aaron Petrou, Ricky Mitchie, […]

NMBA launches adviser apprentice scheme

SimplyBiz’s training arm the New Model Business Academy has launched an A-level entry school leavers apprenticeship programme with the Babington Business College. The apprenticeships last for 12 months and include the Chartered Insurance Institute financial administration exam, an NVQ in providing financial services and a certificate in customer service. Adviser firms can initially apply through […]


Jupiter: Net flows down 70% due to ‘hiatus’ in IFA market post-RDR

Jupiter has reported a 70 per cent fall in net flows in the first quarter of 2013, which it blames on a “hiatus” in the IFA market post-RDR. The firm’s net flows fell from $688m in the fourth quarter of 2012 to £209m in Q1. Jupiter says the predicted hiatus resulted in a slow start to […]


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There are 49 comments at the moment, we would love to hear your opinion too.

  1. The FCA is in the great position of being able to say ‘This has got nothing to do with us’, meaning that they can change the rules without loss of face.

    It’s time they did so.

    It’s time they proved that regulators have some commercial sense. At the moment the evidence suggests otherwise.

  2. Sobering news, bearing in mind the regulator’s natural bias towards the banks and restricted market.

    Unfortunately, RDR was always bound to result in a limitation of advisory services and consumer access. One only has to consider access to other professional services, such as law and accountancy.

    However, if this is to be the case, is it in the mass affluent consumer’s interest to be driven towards the restricted advice?

    Bearing in mind that, SJP for one, has developed a method of circumventing the commission ban – is it not time to limit the amount that they can ‘rip clients off’ by, and introduce a system of provider funded fees (call it ‘commission’?) for truly independent advisers, who can demonstrate a committment to giving unbiased advice to the mass market?

  3. I’m sure that many ex-bank advisers will do very nicely in the end. Only this morning I had a CV from a Private Banking adviser seeking a new position…. a little surprised by the size of current package.. £110k+car+FS pension +”benefits” generating £200k in “total fees” (last year) of which only £40k was self-generated…. I presume the bulk came in from the land on the mat “I use my Bank” ill-informed client.. I imagine that s/he will find it fairly difficult to match such a package working for another firm, without clients provided and where firms live and die by service. Then again, perhaps I’m wrong…

  4. The RDR has been the death knell of the industry.
    The social elite should hang their heads in shame.
    an absolute disgrace

  5. Nicholas Pleasure 17th April 2013 at 9:33 am

    6% sounds like a lot but that’s because most of us IFA’s don’t have to pay ourselves AND make a profit on a significant capital investment. Our profit is what we pay ourselves.

    The FSA has always hated the fact that retail financial services was a ‘cottage industry’. Looks like they have now provided the regulation to ensure that it always stays this way.

    Nice to see HL doing so well today. Another sure sign that the cost of advice is now far too high.

    Stupid regulators.

  6. Just shows you how much they were taking previously! I had a client who was seen by Yorkshire Bank, using AXA, with commission in excess of 9%!! Fortunately she had the brains to see through this and we dealt with her for the equivalent of around1% – and still made a profit. RDR in its current format is wrong, but if it has helped to save consumers from Banks ripping them off, there is a least a silver lining to the cloud.

  7. When advisers were suggesting RDR was a big mistake in its present format, and would take face to face advice away from the majority of the public did anyone in a position of influence care to listen? They allowed this to be implemented with their heads firmly stuck in the sand and just watch them all run for cover as the true damage caused by RDR is now coming to light. Older, more experienced advisers getting out before the proverbial hit the fan and bank based advisers having no choice at all because the banks decided the costs involved were unsustainable. Will those who thought RDR was the way forward now admit unless something changes (and, fast) there will hardly be a financial services industry left within 5 years if this carries on?

  8. 6% is a lot but i think we have to bear in mind what the banks have to pay out for. FA salaries, pension contributions, compliance departments etc. All these things add up to make delivering financial advice through a branch network costly. IFA’s have costs but the business model is different meaning we shouldn’t be seeing 6% adviser charges from small IFA firms.

    I do believe that the closure of bancassurance, while lauded by some IFA’s as removal of the big fish from the pond, is in general bad for the public. Financial services greatest problem is public apathy towards the service we provide. Like them or hate them the banks had the potential to involve more people in the advice process than the IFA sector could ever dream of. RDR has effectively closed this route. Lets not delude ourselves that Joe Bloggs is going to walk into his bank find out he can’t get advice then go looking for an IFA. He isn’t! The nice girl in the bank is going to open him a fixed rate deposit account, he lose out against inflation but will never know because no one ever engaged him in the advice process. The bank is happy, the customer thinks he is happy and the regulator is happy cause no one is complaining.

    That is RDR’s legacy.

  9. “AXA says it needed 6% adviser fee to make a profit”. On the assumption that AXA were profitable before RDR, one can only presume they were charging customers/clients at least 6% before RDR. If they had customers that were happy to pay this up to 31/12/12, why would their clients suddenly be unhappy with this from 1/1/13 onwards?

    Nothing to do with transparency, I’m sure.

  10. Its not as if they weren’t warned is it !

    The provider balance sheets have started to collapse – it might not need a visit to the OFT with a restriction of trade argument after all

    So the inevitable U turn begins and when (as many warned way back at the beginning of all this sorry nonsense) NOT if the RDR fails who will be held to account for the £3billion this theorist’s experimental wetdream cost ?

    Anyone who thinks the end of bank advice means those clients seeking out a fee based wealth adviser on mass is sadly mistaken. Bank advice is actually good for the IFA not bad !

    RDR is a catastrophic failure many knew it but cannot be smug for knowing so !

  11. Well at least the mid selling claims will now fall!

  12. Well at least the mid selling claims will now fall! The only ones who did not see this coming a mile off were the regulator and the (Labour)politicians but then that’s not a surprise to anyone who works in this business is it?

  13. Derek Gair | 17 Apr 2013 9:56 am

    Nothing to do with transparency, I’m sure.

    You obviously believe the banks were exempt from issuing Key Facts Documents/Information and Suitability Letters/Reports?

    I can tell you as a former bank based adviser (I hated it incidentally) they weren’t but what they did have was a captive audience who trusted them to look after their assets. I saw their Key Facts Documents quite clearly showing 6% or 7% up front charges and the clients didn’t bat an eyelid. The problem now is the banks can’t justify those charges and they’ve decided to make everyone redundant. They want their clients to do it all themselves online without any advice being part of the process, or the bank based staff left taking the funds and sticking them into a deposit based account. The customers in my opinion would still be happy to pay 6% but the regulator would have a field day as those level of charges for a packaged product can not be justified. This is the new world where what went before without question, can’t be allowed to continue. That is until they change RDR. Watch this space…..

  14. @ James

    Wasn’t me talking about Transparency James !

  15. Dominic 9.26am –

    Well said many “advisers” in the banking industry have been getting fat off the land for far too long. Some of the packages in this area are far too high no wonder they needed 6% to generate a profit. Since when did you need a car to get to your branch and sit in the comfy office?

  16. The regulator will not start to think things through until the financial reality of RDR hits THEM financially due to the lack of firms paying them fees. 50% less Bank advisers, 23% less IFA’s, 75% less Mortgage brokers (over the past 5 years). They need OUR money to trade so when they need income to fund their salaries, perks and pension + pension deficit starts to dry up they will have to make some commercial choices.

  17. A key purpose of RDR is to encourage the market to offer a more balanced set of propositions to customers.

    FCA and FSA preceding should be expected to develop rules which encourage their preferred model.

    Providers & distributers have an opportunity to embrace such change by swimming with the regulatory tide and developing more non-advice propositions.

    More informed & engaged customers will ultimately be profitable customers and likely to appreciate the value of advice. A healthier industry is likely to result.

  18. As some people have pointed out, it’s perfectly allowed for the banks to continue charging the 6% charge for investments if they wish…it’s just that they daren’t do so any longer as they can’t hide them behind the smoke and mirrors system that Investment Bonds used to use.

    And let’s be honest – ordinary people did NOT get “financial advice” from the banks – they were flogged whatever high-commission product they management instructed their salespeople to sell that week.

    No advice is better than bad advice and the banks leaving the retail investment area is almost certainly a good thing.

  19. @IFA

    Did I hear that right – you say

    NO savings is better than SOME savings in a ‘bank’ savings plan ?

    You’re in the wrong job mate !

  20. I hate asking clients for money that should be paid by providers. I research the market, and then I market product providers’ stuff to clients, and what do I get from them for getting their products to the consumer? Nothing. Nothing. Nothing. This has to be the craziest business scheme ever invented!

  21. The bank system was quite imperfect, from a consumers perspective, but consumers with their inbuilt apathy and historic ‘respect’ for banking institutions carried on dealing with them.

    From an advisers perspective it provided two things – firstly, new advisers came to the industry having been trained up by the banks (and DSFs), secondly, if a bank customer approaches an adviser he will normally become the advisers client as value can be shown and breadth or choice can be proved.

    By killing off the bank esctor the terminator has also created a death sentence for the future advisory industry.

  22. @Ken Warren

    Nowhere else in the whole commercial world are manufacturers BANNED from paying to market their product

  23. @ Alan Lakey

    Completely agreed. From someone who was trained by DSF’s and cut their ‘face 2 face’ teeth in bancassurance the demise of the bancassurance sector is worrying for IFA’should be worrying for IFA’s.

    No longer will the banks promote the benefits of getting advice to the mass market and no longer will they pay new recruits to go through the lengthy qualification process.

    I think anyone applauding the withdrawl of the banks from the advice sector is being short sighted. Hands up any IFA that is willing to take someone on that isn’t fully qualified and put them through the required training?

  24. @Ken Warren

    Did you ever really get money from providers under commission rules or was it simply client money funnelled to you via a charge?

    Great example. From a former life I distinctly remember the structure of a Friends Prov Investment Bond contract.

    This would allow up to 7% Initial Commission and would levy an Establishment Charge based on the original premium of 1.4% for the first five years. Was it really a coincidence that this Establishment Charge precisely covered the commission liability?

    For me I think you can have a worthwhile conversation about whether this style of charge offers any benefits over Adviser Charging as it stands now. What I would say is that there are serious flaws in remembering commission fondly as a ‘magic pot’ of remuneration that had no link to client money. It’s that mental separation that has contributed to the creation of the environment in which we now all work.

  25. @ Derek Gair, 12.33 pm

    You’re both wilfully misquoting me and showing a shocking lack of understanding how banks were operating.

    I said NO ADVICE is better than bad advice….you somehow made that “no savings” is better than “some savings”!

    Let’s be clear….banks had no interest in encouraging younger people to save £100 per month into an ISA – there was no juicy upfront commission in it for them.

    No, they wanted 65 year old Mrs Miggins, with 100k on deposit with them to see their “financial adviser” who then tried to persuade her to invest in this weeks structured product/investment bond/other 7% commission-paying product*.

    So, no new money being created, no younger-generation savings, no financial planning in the true sense. Just a bunch of product floggers pressured incessantly by their management to flog even more products, regardless of the benefit or not to the customer. I, for one, think everyone is well shot of these banks from the retail “advice” market.

    (* delete as appropriate).

  26. @ Transparency | 17 Apr 2013 1:28 pm

    Personally I would always choose to pay 1.4% for 5 years rather than 7% now. Especially as with many bonds the establishment charge was waived if the client died. Important for older clients.

    I guess if the fees logic on retail products was really what clients wanted then we would see it in all walks of life. At the checkout in Tesco’s they would say “That’s £50 for your shopping and £40 fee to us for providing the store”.

    They don’t do that because PEOPLE ARE NOT INTERESTED! They only want to know the final price.

  27. @IFA

    Sweeping statements about tied advisers are disgraceful, I have dealt with numerous customers whose experience with IFAs was horrendous, from blatant churning to advisers whose idea of a balanced portfolio was to have 4 different WP Bonds with 4 different providers!!! I wonder why???

  28. A Financial Conduct Authority spokeswoman says: “We are monitoring the retail investment market as it evolves and will consider whether we need to take any action, including rule changes or guidance, ahead of the post-implementation review in 2014.”
    But, it’s too late baby, now it’s too late
    Though we really did try to make it
    Something inside has died and I can’t hide it and I just can’t fake it Oh, no no no no no”

  29. I really don’t see what all the fuss is about if bank assurance dies IFA’s benefit.

    There will also be less systemic risk in the system because there will be diversity of advice.

    Mass-market advice = mass-market miss selling.

    Do you hear the accountancy or solicitors profession calling out for mass-market providers – the answer to that one is NO!

    RDR will mean a more diversify advice sector which is only good news for the consumer. Product providers are obviously concerned in respects to RDR because my email box is now crammed full of marketing messages, I would estimate that there is a 50% increase in marketing messages from providers. Maybe this is because they can no longer manipulate their payment terms in respects to increasing commission to attract business. This can only be good news as customer service will be the only way of increasing business flows as well as cutting product fees.

    As for where are the new advisers coming from I think you’ll find that will have a steady stream of graduates leaving university who want to become financial advisers particularly as adviser incomes start to rise.

    From an IFA perspective RDR is good news and I don’t care less about banks and building societies after all they don’t care about the IFA’s or mortgage brokers.

    Awaiting the stream of abuse that I normally get on here when anyone shows support for RDR. In my opinion RDR is truly is the IFA’s friend if you only open your eyes.

  30. @IFA

    So for the purposes of doubt then that nasty Bank/SJP/allied crowbar/man from the Pru salesman did wrong by getting Joe Public to save a bit into that awful savings plan with little or no ADVICE instead of letting him go down the pub ?

    Where do you think the lump sums ‘wealth advisers’ are chasing came from to start with ?

    Do you reckon it might be a regular savings/pension plan ?

    Who ‘encouraged’ those same people with a lump sum now you are chasing to start saving in the first place ?

    Do you reckon it might be a salesman ?

    You are definitely in the wrong job mate !

    By the way, as I said earlier, and Alan Lakey put very eloquently, the demise of the Banks is not a good thing for the IFA and for the record I ain’t no fan of banks !

  31. @2.20pm

    What a bizarre comment. How does a single example of bad practice by Industry Sector A disprove an allegation of widespread bad practice by Industry Sector B? There is literally no logical connection.

  32. @ Derek Gair.

    Now you confirm you’re living in a parallel universe! The Man from the Pru? Allied Dunbar? How many years ago are you on about – not this century that’s for sure. More like Life On Mars I think.

    Look, as I said before, banks haven’t encouraged anyone to make regular savings since they took chunky commissions away from pensions at the turn of the century. Since then, all they’ve done is target lump sums of money from (generally) their older customers, and taken a huge cut for themselves on the turn.

    As a social benefit to society, banks have been hugely negative for over 20 years now. If they’re being pushed out a bit, we’ll all be better off for it.

  33. James, I guess one the main drivers of the closure of AXA UK’s bancassurance arm is down to the change in competition law. Under this,Banc advisers have to be profitable in their own right, i.e they can’t be subsidised through the manufacturing of product or investments. In Axa’s model, the overall cost of providing financial advice is around 6%, but the charge it makes is 3% – half the cost of actually providing the advice – and that is why model is not profitable anymore.

  34. it shows the poor returns that the chief executives in AXA made when they invested in the model of bancassurance with the likes of yorkshire and the now defunct coop bank and the now deceased co-operative insurance, it looks that they needed more than 6% to pay their inflated pay packages at the top.
    £25 million for lip service to have an adviser sit in the cooperative banks must be the same type of rash that fred the shred got when he had to hand back his dong and the idiot in royal.

  35. Some excellent comments and debate. Do we think our regulator is listening?
    Would they really change the rules at this stage, even IF they accepted that they had made some serious errors?
    Do we really want to go back to 100% commission? I don’t. I wouldn’t mind a hybrid, whereby every provider paid the same marketing fee. For example 1% max with a minimum of £x.. Then we charge our fees on top for real advice and service. I was listed in the original RDR consultation paper where I said the same…& was ignored like all of the feedbacks.

  36. Get real. It was the pay away to Coop and Clydesale that means they would have to charge 6%. L&G didn’t pursue the deal with the Coop for this reason. AXA had the wrong people making commercial decisions.

  37. why are money marketing stating that Santander are keeping 150 advisors to look after existing clients. This is not the case 110 advisors will look after structured maturing products only and not oeic type investments. Santander are not looking after either staff or clients. Another nail in the coffin for bancassurance and the majority of clients are left high and dry talk about TCF…….

  38. Paul, as usual you spin your figures. The reality for the customer was they would be charged 4.5% for taking out an ISA. A disgraceful amount when you put it all in one fund on an AXA owned fund platform.

    Of the 4.5 the bancassurance were probably taking a little over 3 with the client being charged an up front 1 and a bit to unnecessarily hold the asset on a platform – disgrace.

    They would sell an AXA fund of which AXA receive the AMC, the AXA platform gets a rebate and the AXA fund group will even rebate back to AXA.

    Don’t try and fool the public with your 3%. You were having a nibble at the customer throughout.

    Any customer paying additional charges for holding a single fund on a platform rather than direct should seriously be asking why this did happen.

    Spin that Paul!

  39. @IFA

    Now I know you are in the wrong job !

    Let me put it a bit more simply for you

    No Advice (i.e interaction/engagement with an ‘adviser’ = nothing, nowt, no savings no pension

    Bad advice (ie interaction/engagement with an adviser) = something, more than he had before a bit of savings or pension

    Now of course had he met a clever chap like you instead of that nasty salesman he would have had more BUT he didn’t and much more importantly he wont !

    So your bloke with no advice at age 65 cant afford to eat beans every night and lives in a cardboard box

    The bloke with a ‘awful’ pension eats beans and might be a tad better off ?

    Want’s better do you reckon ?

  40. If AXA new that they weren’t going to be profitable come first January, how much of their business in the run up to that date was written on the basis that an ongoing service was going to be provided, when the management probably new there weren’t going to be any advisers to provide that service?

  41. @ Peter Herd.

    Pete, old mate, nobody comments on your posts any more cause nobody cares.

    I’m just telling you this as a friend.

    Please go away and deal with both your clients…they need you.

  42. Protect the customer 18th April 2013 at 9:23 am

    We are now in fourth month of RDR and still a lot to settle down.
    It has got to be inevitable that fees will have to be reduced from the ridiculous levels that folks are charging on implementing plans.
    6% is outrageous. I believe that 2% for implementation is also far too much.
    An initial fee is required to assess the position and make recommendations as necessary. A 1% fee must be tops for the arranging / implementation.
    Less if figures over £150,000 involved.
    As an industry we need to get real. In the last 10 years I have never charged over 1% for implementation and will not start doing now.

  43. PTC @9.23
    You may need to rethink that if your regulatory costs increase by 20%

  44. @ Deek Gair

    I find your “logic” totally weird.

    e.g – No advice = bank customer continues to earn about 1% per annum interest. Younger customers get Employer-funded pensions via auto-enrolment.

    Bad advice – bank customer loses 40% of his capital (e.g Aviva “balanced” fund, numerous structured products etc etc). Younger customers still get their Employer-funded auto-enrolment pension as banks don’t sell regular premium savings plans and haven’t done since the last century.

    And, look, I’m trying to get on and make RDR work for me, whilst you seem to be saying you can’t make it work…so which of us is in the wrong job?

  45. A very interesting and considered discussion overall. There was a challenge from an anonymous contributor about my numbers.

    I would like to outline the costs again. There was a 3.25% initial advice charge for regulated investment advice, with no ongoing advice charge, which is pretty competitive. And the advice charge was only payable if the customer proceeds with a regulated investment transaction.

    There was a 1.25% initial product/platform charge and no minimum investment amount to access advice.

    The issue was the actual cost of providing the regulated investment advice was 6.1%.

    We are genuinely very disappointed that we have been unable to find a model which balanced the regulator’s requirement that the service be profitable in its own right, whilst setting advice fees at an affordable level. It was a sad day.

  46. @IFA

    You are certainly ‘trying’ !

    Anyway listen enough is enough we’ll see when RDR fails wont we !

  47. Paul,
    Thanks for increasing your 3% comment to 4.5 in the latest post. Lets be honest and consider what AXA would receive?
    325bps Bancassurance advice
    125bps elevate owned by AXA platform initial fee
    75bps pa approx rebate on AXA owned funds
    40bps pa for the AXA owned platform

    At the end of the day it was the poor management of people in bancassurance without the commercial awareness of RDR implications that led to the failure. 4 years to prepare and dead with in 4 months.

    For any client with a single fund on a platform they should be queuing up for redress now. The gravy train is over.

  48. Plus ça change. Protect the Customer demonstrates the continued narrowness of thinking in the industry, and in Britain in general. The pile it high, sell it cheap philosophy obviously works well in Britain, but less well in more developed parts of the world, were the consumer is looking for something better.
    P.t.c. still cannot tear him(her)self away from the percentage cost game. A decent level of advice on the simplest product is unlikely to be achieved for less than £150 (unless the adviser is willing to underprice the value of training and experience). On a £20 per month Stakeholder Pension this relatively small cost still amounts to 62.50% of the first year premium. Its 6.25% on a £200 per month premium. So which is the more honest take 62.5% from the low contributor or 6.25% from the higher contributor.
    I would suggest the £150 costed charge, and this is what RDR allegedly was about, yet doesn’t appear to be. Everyone still thinks percentage. The main difference appears to be the way in which that percentage charge can be extracted from the client.
    I can’t say I totally blame advisers because the rest of the world use commissions as the benchmark. Merchant Banks use percentage commissions to calculate their fees for mergers; solicitors use the size of the estate to estimate their fees; even the FSA/FCA use the turnover of companies to establish the size of their fees.
    Curiously in all this there is seldom any reference to the quality of the outcome.
    On a purely hypothetical basis let us assume the P.t.c.’s customers are severely disadvantaged relative to peer advisers clients. The first question would be, how does one establish that criteria? There are so many variables it is all but impossible. The second question would how to quantify the margin. All but impossible to determine based on the fact that each person has a different agenda.
    So fundamentally we have no established basis on which to measure the quality of the advice given other than our general perception (which starts to make a mockery of the FSA’s vaunted detriment reviews) so why are we charging clients a 1% fee or £150 per hour, or whatever factor we consider appropriate.
    That charging structure is based on the logistics of the business itself, not the logistics of the client. If a client wants ongoing service (and that is a question the FSA have totally ignored) then value can only be obtained by the continued existence of the advising organisation, good, bad or indifferent. One assumes that the bad will be weeded out, but I’m not convinced that is a sound assumption, especially if the proprietor has the “gift of the gab”. The result of financial advice is influenced as much by external forces as by the quality of the actual advice. It is quite possible to provide brilliant advice, and see the law changed shortly thereafter and not merely undermining that advice, but perhaps making it a major problem. And vice versa.
    So there are few genuinely objective criteria with which to measure the financial advice industry, or upon which to value the service given. Other than the viability to stay in business.
    The two major unknowns are what price the client will tolerate for advice and what charge the FSA/FCA will levy annually for perceived misdemeanours etc. Neither item can be taken lightly.
    P.t.c can survive at his/her level of costs; AXA belief they cannot survive at their level of costs. Commercial decisions, logically taken – one assumes. One also notes that a lot of the larger organisations appear to be going down the AXA route. This should come as no surprise if one looks back a few years at the reasons the major institutions gave for withdrawing from direct selling. The FSA certainly emulated Nelson with that information.
    As I have argued elsewhere RDR, the main driving force for the realignment of industry is being driven by an abysmal lack of coherent information, and by an obstinate refusal by all sides to improve that information bank and use it sensibility.
    It appears that when talking about the industry opinion is preferred to fact. If that characteristic is transferred to the financial advice given then clients would be better off walking away from the industry, since the outcome can be nothing better than random. And we have no information to say that it isn’t.
    On a slightly separate note I would commend people to read Tim Harford’s article the FT Magazine (20 Apr 2012) about an experiment undertaken by the FCA. The result is intriguing, not merely for the result, but also for the information left out, namely, did the higher response rate lead to a better outcome, or merely more work. Yet again partial information provided that could lead one down a blind alley. The FCA may turn out to be smarter than the FSA – but that does not automatically mean better. What resources are the adviser industry providing to ensure that information provided is relevant, accurate and complete.

  49. In defence of percentages, my potential liability is based on the size of the investment/savings arranged, therefore this has to be reflected in the amount charged. As for 1% being “more than sufficient”, that depends on so many factors – complexity, level of support needed by the individual client, distance travelled, etc etc. It’s a little like saying that Harrods should charge the same as Poundshop!

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