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Only an independent financial adviser or independent mortgage adviser is required to offer a choice of paying by fee. By offering a fee option the adviser / broker can call themselves independent – the term independent doesn’t refer to whether the adviser has access to all the products in the market place. All brokers and IFAs on unbiased.co.uk's searches offer products from the whole of the market.
The ways in which you can pay for advice can be broken down into three main areas whichever type of mortgage broker you decide on:
Commission
A commission-based payment is probably the most common form of remuneration for advisers providing mortgage advice. In this situation advisers are paid directly by the product provider in the form of a procuration fee as a commission on the deal. The cost of this commission paid out by the provider will normally be factored into the price or your product – or in the case of mortgages, into the rate you pay. These commissions vary with different products and providers but will be documented on the Key Facts Illustration (KFI) you receive from the adviser. KFIs are issued to help you compare various products recommended by the adviser. The KFI will give you a full breakdown of the interest rate of your mortgage and the full cost of the mortgage repayments over the term that you have chosen. It will also highlight any other costs, such as product fees and upfront fees that you may have to pay if you decide to go ahead.
Fees or commission
Paying an adviser a set fee is generally more common with investment products but has also come more to the forefront in the mortgage market and may well continue to do so in the future. The fee could be either in the form of an hourly rate or a set fee for the whole job. Fees vary and can range from £50 to £350 per hour depending on where you are in the country and the qualification level of the financial adviser and the service provided. Advisers may offer a free initial consultation and then introduce the fee structure from there.
There is also the option of paying a combination of fees and commission. This is known as commission offset and is where your adviser accepts commissions from product providers in lieu of fees due. If there is not enough commission paid you may have to also pay a fee or if there is too much commission paid your adviser will then rebate some or all of the commission he or she receives back to you or improve the terms of any financial products you have bought.
How financial advisers are paid is currently under review as part of the FSA's Retail Distribution Review (RDR). It is likely there will be changes to the way advisers charge clients. We will update this page when the changes are introduced.
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