Transparency over fees and service provision post-Retail Distribution Review will allow financial advisers that genuinely add value to clients to charge “substantially more” for advice than they have done in the past, the chief executive of IFA-owned platform Nucleus has said.
In an interview with FTAdviser, to be published today (27 April), David Ferguson refuted concerns that advisers will be starved of business following the transition away from commission, saying that many clients have previously ‘inappropriately’ believed that advice was free.
He said: “I think we are in a period of transition and there will be lots of disruption on the way through, but I think the opportunities for quality advisers is absolutely immense and they’ve got everything to look forward to.
“In the medium term, I think there is a lot of transition to go through and some costs as people transition their business but, in the end, there are millions of people in the UK that require the services of a good quality financial adviser and I think providing the service quality is high.
“I think IFAs can charge substantially more than what they have probably done in the past and deliver much better client outcomes.”
In recent months there has been much speculation on advisers’ post-RDR income generation capabilities, with numerous surveys published purporting to evidence arguments on both sides of the debate.
In the last month alone research published by CoreData has claimed that advisers in the largest fee bracket between £100-150 per hour could face a 40 per cent drop in income, while another study produced by IFA database MyTouchstone claimed that advisers could earn an average of £148 per hour.
Mr Ferguson said that the ‘winners’ of the RDR will be those advisers that demonstrably deliver “added value” to their clients.
However, responding to previous predictions that many lower- to middle-income consumers will no longer be able to afford advice, Mr Ferguson conceded that some advisers will “struggle” in the post-RDR world.
He said: “I think people have believed that advice was for free and that was probably an inappropriate message for advisers to send out because obviously it has never been free as they have been paying for it through commission in the product.
“So the new transparency that is emerging around this is a good thing. I think some IFAs will struggle to survive in that world; if you are unable to demonstrate a decent service proposition and a return for that fee then obviously you are going to struggle.”
Earlier this month Nucleus confirmed that it had broken into profit for the first time in Q1 2012.
Mr Ferguson said: “We’ve flirted with profitability in the past but this time it’s different - this is the start of a long term relationship. To be debt-free, profitable and working for such a great bunch of quality advisers makes this a big moment for the business.”
