In a recent survey conducted by the Financial Conduct Authority (FCA) almost 50% of the respondents thought that the advice they were receiving from their adviser was free!
The survey of over 2,000 people, concluded that 49% of clients or clients were unaware of the cost of the commission paid to their adviser after they had purchased a financial product.
Surprisingly only 29% of consumers ere ware that they would pay a fee or commission for financial advice they received. And 33% of respondents who do not currently have a financial adviser believed that the advice was free. The FSA survey findings highlight the greater need for more openness and transparency in financial services which is to be introduced with effect from the 1st January 2013. From January 2013 onwards, all financial advisers will agree an ‘adviser charge’ with their clients before commencing any work and giving of advice. This can only be a good thing for all concerned..
The “New” adviser charging regime will replace commission on the most investment and pension products, although it can still be paid from the product. In most cases we anticipate that this is what will happen.
So where does the lack of awareness of commission and fees from? As a practicing Financial Adviser who has been in the industry for nearly 30 years I am not sure why and how the people surveyed think that advice was ever free.
For those individuals who have never taken financial advice, it is perhaps not a huge surprise that financial advice is perceived to be free. Indeed they may never have given it any consideration.
On the other hand for those who have received advice in the past, they may never have had the cost of advice fully explained to them. My concern is that if advice continues to be perceived as free, then we should be worried. Anything that is regarded as free as often perceived to have little value.
Our job certainly from now onwards if we have not already been doing it, is to explain more clearly the cost of financial advice before we start working for our clients. Financial advisers have been required to offer the option to pay a fee or commission for advice for a number of years.
The new rules for “adviser charging” from the 1st January 2013 have been designed to make the cost of advice much clearer to clients and to also prevent any product bias. This has to be good for clients seeking financial advice.
The above article should not be construed as advice and should not be seen as such. Always seek professional financial advice before making any decisions. If you require investment advice for future planning please contact us as Midlands Investment Agency or call us on 01902 742221.
