A substantial majority of clients still prefer to pay their adviser fees through the product despite changes under the Retail Distribution Review that encourage fees, with platform provider Skandia revealing to FTAdviser that 97 per cent of all charges since the rule changes are taken in this way.
Under the RDR, advisers must agree their remuneration directly with advisers as commission has been banned. Advisers can either take a fee, or can agree a separate charge that providers are able to ‘facilitate’ by deducting from the amount invested.
In an interview with FTAdviser, Michael Barrett, platform marketing manager at Skandia, revealed that almost all of adviser charging, a combination of both ongoing and initial, is being facilitated via the product based on early post-RDR trading.
He said: said: “We have seen, since the RDR, that 97 per cent of adviser charging is facilitated by the product.”
Several advisers agree that the majority of clients have not changed their mind-set and prefer to keep the process similar to how it worked pre-RDR.
Martin Evans, director of Newport-based Prism Independent Financial Advisers, said most investors still prefer to pay for their financial advice via the product rather than write a cheque and that when a choice is offered, “8 times out of 10 they will take it out of the investment”.
Mr Evans said of the Skandia numbers: “I am not overly surprised by this figure as clients are used to paying the cost through the policy.
“What we are finding is giving clients the opportunity to post us a cheque and the amount for the investment or to facilitate it via the investment, and 8 times out of 10 they will take it out of the investment.
“The mindset is that the investment includes the cost.”
Alistair Cunningham, financial planning director at Wingate Financial Planning, added that although he thought this figures would be in the 90s, he added that he thought Skandia had “skewed” the figures.
He said: “A better way of looking at this would be via new adviser charging agreements. As it stands that number would be artificially inflated by those who have moved from the old model to the adviser charging model.
“For us, it would be high 70s/low 80s of initial adviser charging is via the product and high 80s of ongoing adviser charging is via the product.”
Malcolm Murray, head of marketing at Transact, added that Transact has seen that 100 per cent of adviser charging is facilitated via the product as it has been operating this model since 2000.
He said: “Even where there are ad-hoc charges that sometimes arise, not regular charges, that can be facilitated through the product.
“We facilitate all sorts of different adviser charging. Some advisers have monthly charges some have a percentage charge plus initial, product by product, deal by deal. No
“I don’t think that everyone can have 100 per cent through adviser charging as they would have to ensure that all their clients have signed up to adviser charging.”
