Time to blow out the fees myth

There is a myth that continues to circulate in the retail financial services sector that after 31st December 2012 UK consumers will have to pay a fee from their net pay in order to access independent financial advice.

This is fundamentally not true and is a myth being perpetrated by some people who should know better.

It is true that ‘commission’ will be abolished on pension and investment plans from the 1st January 2013, but that is very different to being required to pay a fee from your bank account (unless you want to of course).

Commission that is determined or influenced by the product provider is abolished. It is to be replaced by ‘Adviser Charging’.

This works by the client and the adviser agreeing a charge for services that can be taken from the financial product that you purchase.

Each IFA firm will prepare their own proposition and determine their own pricing model.

Some will continue to provide a bundled advice and implementation service where the consumer will only have to pay if they decide to follow the advice and buy a pension or investment pan.

Others (such as Informed Choice) will unbundle and charge a specific project advice fee that is not conditional on buying a financial product, with a further implementation charge if you do decide to buy a financial product.

Some IFAs will charge a fee calculated on an hourly basis or a fee based on the percentage of investment assets.

There will be a combination of offerings from different firms and as ever it will pay the consumer to shop around and find the adviser they believe most suited to deliver what they need.

Advisers will only be able to receive future charges from financial products (often referred to as renewal or fund based commission) if they also provide an on-going service.

If you use an adviser it is likely that they will communicate any change that applies to you ahead of the relevant dates.

What matters as with all things important in life though is not price but value.

Forget the other often peddled myth that somehow advice is free. It never has been and never will be.

If by some chance I am wrong on that score and it is possible to get free advice then I suspect that advice will be worth exactly what you pay for it!

Education, confidence, reassurance, planning, challenging your thinking, acting as devil’s advocate, explaining and keeping you on track to achieve your goals and objectives, are all items of value worth paying for from an adviser.

It is simply no longer about only selecting investment products and investment funds. Choose an adviser who can add value to your financial well being and pay appropriately.

Photo credit: Flickr/lucyfrench123