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MSE News: Guest Comment: How financial advice will change for good
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So how do they work that out exactly? A system based on percentage commissions is an incentive to target high-net-worth individuals. Wirh a system based on flat rate fees, the customer's wealth makes no difference to the IFA.bigfreddiel wrote: »But according to a recent report from Aviva, around three million people will struggle to get decent advice once the new rules come into force, because IFAs will target higher-net-worth individuals after the RDR."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
So how do they work that out exactly? A system based on percentage commissions is an incentive to target high-net-worth individuals. Wirh a system based on flat rate fees, the customer's wealth makes no difference to the IFA.
Under the old system, high net worth cross subsidised low worth clients. Now that is not being allowed, low worth clients would find it would cost them much more than they would have paid under the commission system so they would be unlikely to use the service of an IFA.0 -
Under the old system, high net worth cross subsidised low worth clients. Now that is not being allowed, low worth clients would find it would cost them much more than they would have paid under the commission system so they would be unlikely to use the service of an IFA.
Exactly, iam a prime example of this. Currently HL charge me no explicit fee, good. However they keep something like 0.5%/0.75%, which equates to around £15/20. Post RDR they will bring in explicit fees,and if its anything like the unbundled platform fees it will cost around 3x as much. And for only a small portfolio the costs wont make it worthwhile.0 -
However, they still make more out of their high-worth customers on commission than they will on fees. Pricing low-worth customers out of the market while capping what they make from high-worth customers isn't going to be a winning business plan.Exactly, iam a prime example of this. Currently HL charge me no explicit fee, good. However they keep something like 0.5%/0.75%, which equates to around £15/20. Post RDR they will bring in explicit fees,and if its anything like the unbundled platform fees it will cost around 3x as much. And for only a small portfolio the costs wont make it worthwhile."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
However, they still make more out of their high-worth customers on commission than they will on fees. Pricing low-worth customers out of the market while capping what they make from high-worth customers isn't going to be a winning business plan.
No but if you look at some of the other platforms (dunston recently linked somewhere which is changing their platform for post RDR), that they are taking £40 a year + a percentage of portfolio depending on the size which would make more money from the higher net worth clients, but it still rules out lower end clients.0 -
However, they still make more out of their high-worth customers on commission than they will on fees. Pricing low-worth customers out of the market while capping what they make from high-worth customers isn't going to be a winning business plan.
They won't have an option. The FSA is banning all commission sales. Charges will have to be explicit.
For unbundled platforms at the moment, the higher the amount you have, the lower the percentage fee you pay the platform. Lower net clients have to pay more.0 -
I refuse to speculate until I've seen what the post RDR platform charges are.
As for where those who can't afford fees will go, there are a lot of good books and very informative web sites on the subject of pensions, investing, ISAs, and such like. There is also a lot of free advice here, admittedly of varying quality, but humans are intelligent, adaptable, and capable of handling contradictory information and different points of view.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
We've drifted from advice fees to platform fees. But sticking with the platform fees, presumably it'll be possible to buy commission-free shares in funds direct from the fund house.
Self-select ISAs will be an issue. But there's obviously a demand here, because everybody's ISA life, even the rich, starts with one year's allowance, and many platforms will want that puny sum hoping it will grow. Not many firms will want to price their ISA so it's not in the running until you've already built up 10 years' money on somebody else's platform."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
So, what's to stop an IFA from sending all the various lenders a letter stating that he will remove their products from his list of available products unless they pay an administration charge of £1,000 per annum. This is and admin fee, not commission.
Just imagine, if just 100 lenders pay, then the IFA makes £100k and may then offer his services for a ridiculous fee such as £10 all-in.
There are always going to be ways to beat the system, same as with the new AWR.Never Knowingly Understood.
Member #1 of £1,000 challenge - £13.74/ £1000 (that's 1.374%)
3-6 month EF £0/£3600 (that's 0 days worth)0 -
gadgetmind wrote: »I refuse to speculate until I've seen what the post RDR platform charges are.
True, no-one knows exactly how they are going. However Fidelity is already moving over to unbundled with the introduction of a fee to avoid initial charges and switching fees. Cofunds has also announced an annual fee plus a to be decided platform charge.We've drifted from advice fees to platform fees.
It's part and parcel of the advice service though as the IFA will use a platform to place any business.But sticking with the platform fees, presumably it'll be possible to buy commission-free shares in funds direct from the fund house.
Will it be cheaper though? If you are talking about funds, the unbundled platform provides a fund manager rebate of 0.75%. Buying direct from the provider presumably would mean the fund manager keeps that rebate.Self-select ISAs will be an issue. But there's obviously a demand here, because everybody's ISA life, even the rich, starts with one year's allowance, and many platforms will want that puny sum hoping it will grow. Not many firms will want to price their ISA so it's not in the running until you've already built up 10 years' money on somebody else's platform.
They probably will all compete but that charge may well be higher than what is currently available on bundled platforms as the bundled platforms will have to make up the loss of revenue somehow.0
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