Advice firm Drewberry found that, despite nearly five years passing since the advent of the Retail Distribution Review, the idea of commission-based adviser remuneration is still the second most popular choice with the British public.
Work still to do
Tom Conner, director of Drewberry, said: “This shows that we still have some way to go as an industry to get the idea of fee-based advice across to the man in the street. Our results suggest that, by and large, Britons tend to lean toward the options that are easiest to understand.
“Just over half of Britons like the idea of ‘set fees’ for ‘standard’ pieces of work, for example, but many advisers have struggled to price their services in this way as there’s no such thing as a ‘standard’ client which makes fee calculation more complex.”
Conner said that this is why nearly a quarter of Brits would be willing to pay commission: “To many, it’s still an easy to understand, painless, option. Despite its shameful track record, concerns as to commission bias haven’t really penetrated the ‘zeitgeist’.”
Gulf between advisers and clients
He added that, as an industry, UK financial advisers have yet to “nail down a common pricing model that resonates with the public”.
“Only 21% of our respondents said they’d prefer to pay an hourly rate which, for many adviser business models, is the most efficient and transparent way to price their services. This underlines the continuing gulf between how Britons see the value of professional financial advisers compared to other professional advisers such as lawyers and accountants who often charge hourly fees.
“Only 6% of respondents said they were happy to pay a percentage-based fee on the level of assets involved even though this has become the prevailing model for most financial advisers in recent years. This method is often easier for advisers as it’s relatively quick and simple to calculate what the fees would be, it just doesn’t appear to be very popular with the public.
“Naturally different businesses will want to price themselves in a way that works for them, and that should be their prerogative; but, on the whole, we haven’t yet come up with a widespread charging model that’s particularly popular.”
Conner concluded: “Maybe over the next five years this will change as the industry continues its march toward becoming a more ‘trusted profession’.”
The research was conducted by OnePoll on behalf of Drewberry and surveyed 3,000 full-time, part-time and self-employed Britons between 19 and 27 June 2017.