Which? has found huge variations in Independent Financial Adviser (IFA) fees across the UK, with one quoting £2,450 more than the cheapest alternative to transfer money into a stakeholder pension.
The consumer champion asked 200 IFAs to give quotes for different services and found large regional variations in the fees. Although the average fee quoted to transfer a £10, 680 investment into a stocks and share Isa was £356, one adviser in the south-east quoted £2,500. Two IFAs in the south-west and the east of England quoted £106.
Meanwhile, an IFA in the north-west quoted nearly £2,000 more to arrange a protection policy for a 30 year old female than an adviser in Scotland quoted to do the same job. The average fee Which? were quoted by IFAs in this case was only £596.
Currently there is no approved list of ‘typical’ charges for IFAs’ fees, meaning people will find it difficult to know whether an IFA's fees are reasonable. Which? wants IFAs to be forced to publish a rate guide on their website, so that people can make an informed decision about which IFA to choose and what is a reasonable amount to pay.
Which? believes that consumers should go to an IFA rather than approaching their bank for advice, and has produced a list of key questions that people should ask in order to help them choose an IFA that offers a fair price and good service.
Which? chief executive, Peter Vicary-Smith says: “Financial advisers should be much more transparent in their pricing, providing details of all their charges upfront. At present it's very difficult for customers to know how much they're going to be charged, and what is reasonable.
"IFAs should clearly display their fees online and if they don’t the regulator should step in to make this happen.”
New regulations which will be introduced at the end of 2012, will make paying for financial advice fairer and clearer. They will ban advisers from receiving commission for new investment advice. This should mean that advisers are more likely to recommend the best course of action for the consumer rather than the one which pays the adviser the most commission.
FACTFILE:The full article ‘Counting the Cost’ appears in the February 2012 issue of Which? Money magazine. For further information, a copy of the full article, or an interview, please contact Natalie Hagan. For more information about Which? Money please visit www.which.co.uk/money