CompaniesOct 21 2014

Advisers have increased client fees 5% since RDR

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Financial advisers have increased the fees they charge clients by around 5 per cent since the implementation of the RDR, according to exclusive research from intermediary database MyTouchstone.

MyTouchestone data collected among more than 3,200 advisers shows the average hourly rate reported by firms using this model during the first half of this year was £165.70, compared to £157 per hour in the first half of 2013, immediately following RDR coming into force.

This means there has been an increase of 5.4 per cent, which is well above the 2 per cent CPI annual inflation rate for 2013 as a whole, and perhaps reflects the need to cover rising regulatory bills.

The average ongoing fee for those using a percentage charging model reported in the first six months of 2014 was 0.72 per cent of funds under management, compared to 0.69 per cent in the first half of 2013.

MyTouchstone said its data also showed that there was an increase in the number of firms charging percentage fees.

Peter Welch, intermediary director at Equifax Touchstone, said: “We believe the fee rates outstripping inflation is significant and consumers are seeing that they are getting value for money from their advisers and are willing to pay more for the service.

“This also means that those firms that haven’t yet reviewed and compared their fee model in their local market could be missing the opportunity to increase their margins.”

He added that overall, the fee models identified in its new analysis demonstrate how the intermediary market has adapted to the new environment created by the RDR.

Mr Welch said: “It appears the market has evolved for the benefit of clients and intermediaries alike. Clients are accessing a service that they’re willing to pay a higher price for and intermediaries are able to increase their margins to invest in their businesses going forward.”

Debates over regulatory fees were revived earlier this year after a number of advisers reported their overall bill had risen by 30 per cent or more in 2014, primarily as a result of a major hike in the FSCS levy as the service moves to a three-year funding model.

For its part, after several years of increases the FCA actually reduced adviser fees in its latest budget, after revising the blocks into which firms in the sector are assigned.

In the summer, the Association of Professional Financial Advisers reissued its call for regulatory fees to be reduced.

Director general Chris Hannant said at the time: “Advisers are still paying a disproportionately large share of the regulator’s costs, given they represent a very low risk of consumer detriment.”

donia.o’loughlin@ft.com

Additional reporting by Ashley Wassall