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Data points to divergence in adviser fee rates

Hourly rates charged by advisers appear to be diverging, as a survey conducted by adviser referral website Unbiased claimed fees have fallen significantly over the last year just three weeks after a major study published by adviser database MyTouchstone found charges had increased.

According to Unbiased’s survey of 140 advisers in October this year, the median hourly rate charged by intermediaries is now £150. This is down 14 per cent year-on-year compared to the median of £175 per hour reported by 166 advisers in the same research in April 2013.

Unbiased added fees for various specific advice scenarios and found these have remained largely static over the last two years.

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For instance, advisers would typically charge £3,500 for advising a client with a £200,000 Sipp, £100,000 of investments, income from a defined benefit pension scheme and a buy-to-let property with a value of £250,000.

The apparent decrease cited by Unbiased comes in contrast to a reported increase of around 5 per cent over a similar period found in research among 3,200 intermediaries undertaken by adviser database MyTouchstone last month, reported exclusively by FTAdviser.

Average hourly rates across the firms in the dataset using an hourly-charging model during the first half of this year was £165.70, compared to £157 per hour in the first half of 2013.

Percentage charges were found to have increased to a similar degree, with the average ongoing fee in the first six months of 2014 for those using this model sitting at 0.72 per cent of funds under management compared to 0.69 per cent in the first half of 2013.

Some suggest adviser fee increases are necessary to cover the cost of rising regulatory bills, especially to cover spiralling compensation scheme levies in the wake of major failures since the financial crisis.

Karen Barrett, chief executive of unbiased.co.uk, commented: “As with any professional adviser, costs are only relevant in terms of the benefit realised.

“We would urge consumers to not only understand costs but also the level of service they will receive, so as to make a judgment on which adviser delivers best value for money overall.”

She pointed out that the site’s recent research into the value of advice found that those who had been to an IFA received an additional income of £3,654 every year of their retirement, based upon a pension pot of £100,000.

peter.walker@ft.com