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The public do not want to pay fees

At times it feels like financial services policy can be summarised by the phrase “fees good, commission bad”.

The problem is that no one asked the public – or at least not very many of them. This week, research for Money Marketing by Nunwood Consulting shows four out of five people from 1,000 surveyed do not want to pay fees for advice.

The modernisers argue we must move to a situation where IFAs charge a fee as a percentage of funds under management.

Our view has always been that IFAs should, where possible, diversify their income streams so more business comes from fees and, if possible, they should move to the fee model.

The reality is this is the only way an advisory business can shield itself against the massive political and regulatory risks facing commission-charging advisers.

But we have misgivings about forcing IFAs to charge fees when the public does not seem willing to pay and about demonising those advisers who are convinced that they cannot convince their clients to pay fees. We are also concerned that comparisons with the US and Australian charging models are too easy. Australia has pension compulsion while the USA has a 401(k) pension system designed to spread an already established equity culture.

The UK may never have full compulsion and the price-capped stakeholder pension is certainly not a 401(k) plan. Consideration must be given to just how much damage will be done to distribution and as a result savings if a move to fees is brought in by force or at least is brought in too quickly. Reform can get too far ahead of the public it is meant to help.

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