Hourly fees for financial advice have been declining, according to latest research from unbiased.co.uk.
The fees have decreased by 14 per cent in 2014, with a median fee of £150 an hour compared with £175 in 2013. The research, conducted among the 15,000 advisers on the website, revealed while the hourly charge has gone down, other fees have remained unchanged. The cost of an initial financial review and report as well as advice on a £200 a month pension contribution have stayed at £500 each. But advice on converting a £100,000 pension fund into a lump sum and annuity has increased from £1,350 to £1,500 in the year.
This comes alongside a report from consultancy group Harrison Spence, which said 42 per cent of advisers see their business becoming restricted in the next five years, while 18.9 per cent – up from 15 per cent in April this year – anticipate making the change in the next 12 months.
Although more than half of IFAs surveyed – 57.9 per cent – said they would not become restricted, six months ago the result was 74 per cent. Managing partner of the firm, Brian Spence, said, “This sharp move towards restricted status seems to be driven primarily by regulatory pressures.”
“Our experience is that today, many IFAs feel like they are only just staying on top of their regulatory obligations, which are eating further and further into client-facing time.”
The survey showed nearly 70 per cent cited regulation as the biggest challenge facing the industry today, with an “out of touch” regulator being the key factor in the declining job satisfaction many industry veterans are feeling.
The research also shows almost half (44.8 per cent) of advisory firm business-owners are looking to exit within five years, with 10 per cent in the next year alone. Based on 230 respondents, the research shows 48.2 per cent said business strategy, planning and cost control will be the greatest impact on the value of the adviser’s business.
Mr Spence added, “The many determinedly independent IFAs who regard restricted status as a pill too bitter to swallow need to ensure that they fully explore their options – and that their profitability is not sacrificed at the expense of retaining independence.”
Harrison Spence has given advisers ideas of how to stay independent, including engaging with a strategic partner in working on a traditional IFA model and one who is willing to take on the burden of administration and compliance – leaving IFAs to focus on what they do best. Mr Spence added that while there are lots of reasons for an adviser to leave, another can be the cost and lack of profitability that can come with being independent – particularly as most IFAs are sole traders or in very small firms of just two or three advisers. “For the large IFAs, these things don’t have as much of an impact because they have scale,” he said.
He added, “It’s not all doom and gloom but there are lots of different things happening underneath the surface that are positive.”
