While it is unfair to tarnish them all with the same brush, in my experience most charge as much commission as they can get away with.
Some charge as much as 4 per cent, while telling people their service is free and, if pushed, that the commission they are paid does not affect the client. If someone has a better deal, they will then reduce their commission to as low as is necessary to get the business. This means two people in the same position can be charged commission rates differing by as much as 1,000 per cent, which I understood to be a breach of FCA rules.
Unfortunately, from a commercial perspective, this type of business model wins every time, so even those companies that do not choose to operate this way are now forced to in order to compete with those who do.
A proper IFA that charges a fixed fee or percentage will always lose out to the sharks, because consumers believe they are either master negotiators or that the non-advised company has their interest at heart when reducing the high commissions they had tried to charge.
This is, of course, notwithstanding the lack of consumer protection when buying from a non-advised company, something I do not believe any of them explain to prospective customers, or the real possibility that people will buy the wrong product or shape of product when they do not take advice.
This market needs to be actively policed to prevent the current abuses, and companies must be made to quote a price and stick to it, not operate a double glazing-style approach to charges.
Ian Osang
Partner
Ingard Independent Financial Management
Southend
Essex
