Do you prefer to pay by Fee or Commission?

Sunday, 6th June 2010 22:11 - by Resident IFA

The Financial Advice sector is due to undergo a major change on 1st January 2013. Bar Insurance (I.e. Life & Critical Illness) and Mortgages, the way an Adviser is remunerated will move from product provider commission to a fee paid by the Client. As an Adviser, I am all for this. It means that the Client ultimately gets a transparent pricing structure and I get paid for everything I do. Fair, no? At the moment, I can quite easily put in 10 hours work and not be paid for this effort. It is quite within a Client’s rights to decline my advice and solution to their financial needs. A good example occurred on Friday last. I saw a potential new Client who faced decisions on moving from their employer’s Final Salary Pension scheme to a Money Purchase scheme...basically from a costly one for the employer to a less costly one. His logic...all too rare...was that some of the choices he faced were obvious, yet he believed I could potentially add more value to his future Pension by the investment choices taken (however limited the options he was given). My industry faces a big education task in the next few years. The changes will benefit Clients, yet it needs to be communicated effectively. Anyone remember Stakeholder Pensions...? I hope the process is handled well by the Government and Financial Services Authority, as I find the psychological nature of writing a cheque rather than a faceless intrinsic payment from a product provider, seems more appealing to many Clients I have talked through the Fee vs. Commission choice. That said, I am undertaking more fee-based work, so hopefully this is the tide turning. What do you think of this choice and the changes? What is your experience of paying for financial advice? What would you prefer? Until next time...