A study by consumer champion Which? reveals that independent financial advisers (IFA’s) are charging widely different fees for the same type of work for clients.
According to the study there can be up to ten times difference in fees charged for the same type of work. Which? Use the example of the transfer of a year’s full ISA allowance, a £10,680 investment into an investment ISA the study found that the average transfer fee was £356 but one adviser in the south-east said it would cost £2,500 and the lowest quote was just £106.
Which? found many other examples of huge differences in prices for common financial services.
At a time when returns on investments are low due to the underwhelming performance of the stock market, investors need to pay even more attention to the value-for-money of IFA’s and the study by Which? details the wide disparity and seeming randomness of fees in the sector.
The chief executive of Which?, Peter Vicary-Smith said that there is no approved list of typical charges for the services that IFA’s offer which leaves poorly informed investors vulnerable to overcharging and means it is difficult to judge whether the ser ice offered represents good value-for-money.
Mr Vicary-Smith said that IFA’s should be required to publish a rate guide on their website.
He said: "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."
In their investigation Which? asked 200 IFA’s for different services and found wide variations in the quotes received. New regulations that will be introduced from 2012 should make paying for financial advice fairer and clearer. They will ban advisers from receiving commission for new investment advice and should ensure IFA’s provide the best advice to the consumer rather than pointing them in the direction of a service or product that pays the highest commission to the adviser.
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