Would you pay a fee for financial advice?
Ever had to pay an up-front fee for financial advice? You may well have, but the way in which financial advice is charged for is changing. Sharon
Flaherty explains what is happening to the way financial advice is charged and why it could affect you.
You may or may not have used a financial adviser in the past, but you're likely to know someone who has. If you think you may need to use one in the
future, then there's something quite important you need to know.
Whether or not advisers are on your radar, there are a lot of people who use them for financial planning, like pensions, investments and mortgages.
However, the way they make money is about to change, which in turn means your dealings with them will likely now be more expensive.
How advisers make money
At the moment, a huge proportion of advisers make their money from commission: so they'll assess your financial needs, recommend a suitable
product and will then be paid by the product provider in commission. (I am taking a bit of a sweeping brush approach here, as there are other ways of
paying for financial advice through fees or by both fees and commission.)
But a regulatory change being brought in by the financial services regulator means that, from 2012, advisers will have to set their own charges for the
services they offer, and will no longer be able to receive commission from product providers.
In practice, this means the adviser will agree a fee with you, up-front for the advice they are to provide. Through this, the regulator - the Financial
Services Authority (FSA) - aims to make the transaction more transparent and take away any bias an adviser may have towards a product provider.
But there is other stuff going on too. Advisers also have to up-skill - basically they need to upgrade their qualifications as the FSA wants the profession
to be more akin to solicitors and accountants, and they want the adviser profession to be more trusted.
Is advice worth paying for?
If you're still not sure how any of