Fewer than one in four advisers have moved to fee model, says platform provider

Platform provider Fidelity FundsNetwork (FFN) said that its September survey of more than 200 advisers revealed that whilst 71% of advisers had begun the "transition" to a fees model, only 23% had already completed the move.

It said that where advisers had asked their clients about paying upfront fees, 75% of clients had said they were "receptive to the idea of fee based advice". Of the remaining number, the clients have either said they are unsure about committing to a fee, stated their unhappiness of paying a fee or chosen not to take financial advice at all, FFN said.

As part of major reforms to the regulation of the retail investment market, the Financial Services Authority (FSA) has set out new rules on how financial adviser firms can be paid.

Under the Retail Distribution Review (RDR) rules firms advising on retail investment products must clearly describe their services as either "independent" or "restricted". This declaration must be provided to client investors in writing in good time before they provide advice services. Both independent and restricted advisers are generally prohibited from receiving payment for those services by anyone other than their clients.

 The FSA has introduced these adviser charging rules after taking issue with the often complex nature of the payment models that exist in the retail investment market.

"The research suggests that whilst 71% of advisers are transitioning to fees, only 23% are actually up and running, so there is still a lot of work to be done," Klare Baldwin, head of FundsNetwork marketing, said in a statement.

FFN's survey revealed that only 1% of advisers will offer a "fixed fee arrangement" for their services. The platform provider described the statistic as "surprising". Of the advisers surveyed 63% said that will charge less than £200 per hour for their services which FFN said would " equate to an initial fee of around £1000-£1500" on the basis that advisers typically spend eight hours in providing a "full advice service".

"It is encouraging to see that most clients are receptive to being charged an upfront fee, although looking at other professions; it is surprising to see so few advisers looking to offer a 'fee for the job' approach," Baldwin said. "In future, we would expect the amount of advisers offering a fixed fee service to increase. Fixed fees might better suit clients that take comfort in knowing how much something will cost and being able to budget for it."

The FSA's RDR rules have been designed with the aim of making it easier for consumers to understand the arrangements for the payment of services in the retail investment market.

The FSA has said that it wants to make the charges consumers face more transparent and that it wants to eliminate bias in the market which it said can exist where, for example, advisers are paid commission by financial product providers in circumstances where they recommend that their client invest in a particular product.

Generally, independent advisers will be required to consider all available products and providers in the market before making a personal unbiased and unrestricted recommendation to clients on what to invest in. Restricted advisers will legitimately be able to offer advice based on a smaller list of products or providers, such as from a single source, providing they are up front about this with clients.

However, both IFA and restricted advisers will be bound by the adviser charging rules other than in cases where restricted advisers can be said to be offering "basic advice". In those circumstances restricted advisers could legitimately obtain fees, commission or other benefits from product providers or others.