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IFA halves charges with ‘virtual’ advice service

An adviser who has founded a ‘virtual face-to-face’ IFA says he can offer clients the same service for around half the 3 per cent the initial advice fee that is still being charged by many peers, many of whom are also applying “unnecessary” ongoing charge increases.

Speaking to FTAdviser, Craig Davidson, founder and compliance director at Devon-based Reckitt House, said he launched the service in February to help address the advice gap.

Mr Davidson said: “I don’t think [the advice gap] is due to the RDR but because of advisers increasing their fees, as it just wasn’t necessary.”

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“‘Normal’ IFAs are increasing their fees, but generally they charge 3 per cent for the initial advice but it is difficult to see how much advice is as it often depends on variables such as how much is invested.

“Advice can be quite expensive particularly if the investment is sub £100k. As we can pick and choose, it comes in a bit lower at 1.5 per cent for initial advice on a £50,000 to £75,000 investment.

“We have a price promise so we have a percentage cap – for example if you invest £10,000 it may work out to be 6 to 7 per cent in fees, but we cap at 3 per cent so for a very small investment that is the best deal you can get in the market. For the bigger numbers it would be around 1.2 per cent to 1.5 per cent, which is very competitive.”

Most of Reckitt’s clients have a £50,000 investment, Mr Davidson added.

However, the ongoing fee is 0.5 per cent, in line with many rivals. Mr Davidson argued that despite the nature of the delivery of the advice, the process is exactly the same bar the fact the client and adviser are not physically in the same room.

He said: “The advice process is no different than it if was ‘normal’ and compliance works in the same way – we check the sales and processes. Also, the Skype calls can be recorded so if I need to play something back we can. We also use Apple’s FaceTime.

“We can deal with clients across the country as we are internet-based. You don’t need to have multiple offices – compliance and everything is dealt with under one roof, and we can keep fees at a lower level. It is really just a way of reducing overheads that means advisers can do their jobs without travelling for miles.

“The telephone is yesterday’s technology; with ‘visual’ technology clients can see their advisers.”

Speaking to FTAdviser, the Pensions Advisory Service said it could roll out the government’s guidance guarantee by offering a ‘virtual face to face’ service for £35 a session.

The promise is a key element in the overhaul of pensions announced at the Budget this year, which will mean from April 2015 savers have much greater flexibility in how they access their pension.