Chris Hann claims the insistence on upfront fees has prevented his firm from attracting new clients, which in turn has forced him to close the company’s office and run the business from his home.
Despite the FSA introducing these regulations to put a stop to rogue advice and promote transparency, Mr Hann said dishonest advisers can still profit from the new fee structure and will always find a loophole.
He said: “I think the RDR has been a disaster. Now financial advisers can charge what they like, which I think will lead to more abuse by advisers.
“Naive people will believe in anything and I expect those rogue advisers will profit from that. The FSA has not achieved what they wanted, as advisers are now charging extortionate fees and finding ways to hide it.”
Mr Hann now charges £100 an hour for advice, but has found that most clients are not willing to pay that much. As a result, the only business he now gets is from older clients, who have trust in his firm’s ability to provide honest financial advice.
“I think some people won’t bother paying and will do it themselves on the internet, but our existing clients will probably stick with us as they know we offer a good service,” he said.
“I am not charging anyone any more than I did previously, but I’d be surprised if I could get any new clients now.”
Mr Hann has grown so frustrated with the situation that he wrote a letter to the FCA querying its intentions, but does not expect a response from the regulator.
While he understands the reasoning behind the FSA’s (now FCA) plan to put a stop to rogue advisers selling products with high commissions, 90 per cent are already doing a good job and that the new regulations will punish honest advisers and customers, he said.
“The FSA should have left commission in its place and just simply put a cap on it. There was nothing wrong with commission, which I always shared with the client anyway,” he said.
Craig Kennedy, an IFA for Cheshire-based Innes Reid, said: “This is a common theme. Some clients seem to prefer upfront fees, although others are very sensitive to it. In terms of stopping commission, it does make it more difficult for rogue advisers, as charges are a lot more explicit and are no longer in the small print. But costs are not fixed, so it won’t stop extortionate fees.”