So how should advisers structure their fees?

Ashley Wassall

Yep, we’re still talking about it: remuneration post-Retail Distribution Review.

Battle was rejoined this week after one adviser, Chris Hann, director of Ipswich-based advisory firm Fraser-Hann, told FTAdviser sister title Financial Adviser that the shift to upfront fees had led to clients leaving in droves and forced him to shut his office and work from home.

Mr Hann said he now charges £100 an hour for advice, but has found that most clients are not willing to pay that much.

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The commentariat was awash with diatribes in a similar vein last year, but since adviser numbers have taken a more optimistic turn and reports have flooded in of regulated advice being in high demand post-2012, the debate has moved on to the more quotidian concern of how advice fees should best be structured to allow the intermediary to turn a profit while playing fair with clients.

This week FTAdviser reported that data from reporting system Selectapension suggest most advisers think the move to adviser charging has not altered the fundamental virtue of the age-old ’three plus a half’ model.

It’s interesting almost entirely because last week a separate report, based on an admittedly small sample size of 79 firms, found that initial fees are falling in many cases while ongoing fees to pay for a more hands-on service are rising. It said for a £100,000 pot the average charges were now 2.4 per cent and 0.82 per cent respectively.

We’ve had comments from advisers with a range of views on this, with some saying they’ve overhauled their models completely to level up initial and ongoing fees at around 1 per cent, while others assert vehemently that little has changed and nor should it. Others still have cited examples of venal peers charging larger upfront fees of 4.5 per cent or more.

Keep the views coming in. The clear lack of consensus is evidence that the sector has not got to grips with the remuneration changes since the RDR came into force and it remains therefore among the most important considerations in the months and years ahead.

Fail to plan, plan to fail

And it isn’t just advisers themselves that are obsessing over business models in the new world; the FCA is apparently also seeking to get under the skin of adviser firm business plans in order to determine whether they represent a significant risk.

Nothing wrong with that in principle, but Ian Stott, client services director of The Consulting Consortium, said advisers he speaks to are often “astonished” at the level of detail they are often asked to provide, which he described as “a bit left-field for those that have not been suitably prepared.”

However, he went on to pointedly ask how one adequately prepares for questions it is not expecting to face. Most advisory firms, he said, still think the FCA is looking at file checking when they examine their businesses. He demanded that the FCA produce a guide to help advisers know what information they should be able to provide.