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Advisers 'must do more on professionalism'

Advisers 'must do more on professionalism'

Advisers have made good progress in turning their trade into a profession, but still have further to go including addressing how they get paid to do their work, according to a report.

This is according to a report published by compliance consultancy firm Engage Insight.

The report, published by compliance consultancy Engage Insight, is based on a study of the retail investment adviser market, looking at 86 firms with a range of turnovers and assets under influence.

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It reveals there is plenty to be pleased about when it comes to professional development at the individual level, with an increase in certified planners and chartered advisers for example.

But there are what the report branded "blind spots" at the firm level.

Among the problems the report found, were compliance processes which tended to be "reactive and checklist driven".

It also found product-facilitated charging was still the favourite way of advisers being paid, but retainers and task or time-based charging were becoming increasingly popular.

The report said segmented services can help ensure that percentage fees reduce as wealth assets increase.

"But a move away from product-facilitated fees and fees based on percentage of investment can help bias management and fairer charging via introducing a mixture of flat annual retainer, task and/or time-based (avoid contingent charges) to ensure the business has a transparent, diversified and ‘sticky’ cash flow due to client-paid fees."

It also found there was a downward trend in charges from 3 per cent initial and 1 per cent annual, to a third of firms opting for 1.5 per cent initial and 1 per cent annual.

The report suggestd there was a "lack of communication" in some advice firms, with people in the business operating in silos.

It said: "Our ongoing research shows that one in six firms still do not have a bona fide business plan; more work is required with those which do have one; and only one in three firms are confident that their business plan determines the cost of delivering its services.

"There is confidence, though, in revenues covering servicing costs. This points to profitable models and good work, with sound structure and strategy through boards and succession planning, as well as clarity on service strategy."

damian.fantato@ft.com