JP Morgan Asset Management has raised concerns that IFAs may not be given the time and regulatory support to move to the fee-based model favoured by the retail distribution review.
In its IFA survey, Surviving the storm, JPMAM says advisers need to be give sufficient time to make the transition and help should be made available to reshape their business models.
The report says: “Our main concern is that IFAs are given realistic timescales, and sufficient support by manufacturers and the regulator, to make this transition.”
However, BestInvest head of communications Justin Modray believes that the switch should be relatively seamless if advisers have strong systems in place.
He says: “I would disagree with the conclusions of the survey purely on the basis that if a house has its compliance in order, then the transition should be fairly smooth. The fact is that some commission-based advisers do not have robust compliance.”
JPMAM says that while it expects higher end professional financial planners to move to a fee-based model, the proposed general financial planner segment will opt for a hybrid business that operates on both fees and commission.
The company claims that there is no definitive answer to the fees versus commission debate and that remuneration should be based solely on the type of advice given.
JPMAM believes that for adviser firms to marry the principles of treating customers fairly with generating sufficient income to run their business, advisers must ensure clients understand what they are paying for and why. It adds that it believes advisers should also look at new and emerging payment structures.
The report says: “The options available to advisers and clients could even widen to include performance-based or assets-under-advice-based fees as well. As the initial retail distribution review paper has suggested, the bottom line is that it must be the client who chooses what is appropriate for their circumstances.”