Two-thirds of financial advisers have continued to charge for initial service as a percentage of funds under advice as the only option or an option to a set fee, “very few firms” charge for on-going services by a set fee, according to data released today by Action Consulting.
The sixth ‘Adviser Snapshot’ by the firm revealed that a third of advisers surveyed said that overall charges are lower than 12 months ago.
An article that featured in the money section of The Times in the weekend quoted Malcolm Kerr, a senior adviser at EY Financial Services, as saying “there is a major concern that the majority of advisers are operating new fee arrangements that turn out to be broadly identical to the old-style commission payments, with a three per cent initial charge and a 0.5 per cent annual charge”.
The survey also found two thirds of advisers had confidence that their firm can replace legacy income through restructured service agreements or alternative income services.
However, this means that a third of firms have concerns over their ability to replace trail commission with ongoing service agreements, and this figure is likely to grow over the coming months, according to the research.
The study released today also revealed that most firms feel regulatory complexity is the main threat to viability, but are confident of meeting Financial Conduct Authority requirements.
Around 90 per cent of adviser firms said that cost and complexity of regulation is the main threat to the ongoing viability of their business. Three quarters of the firms see the approach of the FCA as broadly the same as that of the previous regulator, the Financial Services Authority.
However, two thirds of firms have no concerns about meeting FCA requirements on demonstrating their independence, and four in five have no concerns on the clarity of their charges and the related services provided.
The researchers at Action Consulting have inferred from these statistics that most firms view the change from the FSA to the FCA neutrally, but are interested to see how this will develop as they have more direct, firm-specific contact with the FCA.
Data also revealed that nearly 9 in 10 firms envisage a positive future over the next two years, and roughly 80 per cent report costs growing no faster than revenue, with many having already taken measures to contain costs.
In Action Consulting’s August 2013 research, it was revealed that advisers had ditched the ‘three plus a half’ model post-RDR but that most were continuing to charges fees on a contingent, percentage of investment-based initial and ongoing charge basis.
However, Selectapension argued that not a lot had changed since the new rules came into force. Its more robust data revealed the majority of advisers were still charging clients an initial charge of 3 per cent and the 0.5 per cent for ongoing advice for pension cases.