The Cost
Whether you take tied, multi-tied or independent advice, there will always be a cost for your adviser’s service. Customers pay for advice in three main ways...
1 Fees By paying the adviser a fee, either at an hourly rate or through a fee for the whole job. This is known as ‘fees only’ advice. Fees vary, typically from £75 to £250 an hour. Often the first half hour is free at the initial meeting where you can get to know each other.
2 Commission
By paying indirectly through commission, which is deducted by the product provider from the products you may take out. Often there is not only a commission charged for setting up a plan but there may also be annual commissions on top, known as trail commission.
3 Fees and Commission
By paying a combination of fees and commission. The adviser will rebate back into the financial products or hand to you some or all of the commission or offset it against the fee.
Everyone can choose to pay their IFA by a fee rather than commission, if they want to. In the past the majority of consumers tended to opt for commission. In the future there may well be a shift towards more people paying fees and this will be explained in the information on your IFA’s charging arrangements. Most importantly only an IFA has to offer a choice of payment options i.e. paying by fee or commission or a combination of the two. Tied and multi-tied agents don’t have to offer you this choice, but some may.
The FSA has recently proposed changes to the current system under its Retail Distribution Review (RDR). We will therefore update these pages to reflect industry changes as and when they are introduced.