Which? has called for advisers to publish a rate guide on their websites in order to help people make an informed decision about choosing an IFA, after research showed large variations in the fees charged.
According to Which?, a survey of 200 advisers showed the average fee quoted to transfer a £10,680 investment into a stocks and shares Isa was £356, but one adviser in the south-east quoted £2,500 while two advisers in the south-west and the east of England quoted £106.
For transferring £5,000 into a stakeholder pension, the cheapest adviser charged £50 whilst the most expensive charged £2,500.
One IFA in the north-west quoted nearly £2,000 more to arrange a protection policy for a 30-year-old female in good health earning £30,000 a year with a retirement age of 65, than an adviser in Scotland quoted to do the same job.
The highest charge in this case was £2,100 and the lowest £120. The average fee quoted was £596.
Of the advisers surveyed, 89 per cent said they offered a free consultation.
Which? chief executive Peter Vicary-Smith says: “Financial advisers should be much more transparent in their pricing, providing details of all their charges upfront. At present it is very difficult for customers to know how much they are going to be charged, and what is reasonable.”
Jacksons Financial Services managing director Pete Matthew says: “I would never provide a quote over the phone because I then get chosen over another adviser on the basis of cost. Clients who obsess too much about the price of everything tend to see the value of nothing. If the client obsesses too much about the price I am likely to politely point them towards another adviser. I do wonder if some of the more expensive IFAs out there are pricing to avoid just such prospects.”
Brunning Newman Houghton director David Brunning says: “We do not believe a fixed menu of charges is appropriate because each client is different. The figures quoted as the highest are pretty ridiculous but the lowest quotes are also mad, I would dispute that anyone can do a transfer into a stakeholder pension for £50.”
Which? has also put forward a list of questions it believes consumers should ask before choosing an IFA.
– How will the fees be charged?
– Does the IFA receive commission set by product providers? If so, how will it change this approach post-RDR?
– At what stage of the process will you be charged?
– How will you have to pay the fees, cheque or bank transfer?
– Are different fee options available to you for the service you require?
– What service are you receiving for the fees or commission? Initial or ongoing reviews?
– Will there be any ongoing commission or fees?