Watchdog uncovers widespread ignorance about commission fees
Nearly half of people who have consulted a financial adviser were unaware they were paying for the service, according to City watchdogs.
A survey of more than 2,000 people for the Financial Services Authority found that 49 per cent of those who had received financial advice were unaware they faced a potentially hefty fee through commission payments to their adviser after buying a financial product.
Just under a third (29 per cent) of UK consumers surveyed understood that they would pay a fee for financial advice, while a third (33 per cent) who do not currently receive financial advice thought that it came free.
The survey was carried out a matter of days before the practice of charging customers through commission is due to be outlawed under the regulator's Retail Distribution Review (RDR) in what will be the most far-reaching reform to the way financial services are sold in a generation. It comes into force on 1 January.
Under the reforms, financial sales people will have to agree a fee in advance with their clients after a fact-finding process, although consumers will be able to pay over time through any financial product they buy for the advice they receive if they cannot afford a high upfront charge.
Watchdogs hope the change will eliminate a widespread misconception that "advice" comes free and encourage consumers to shop around for better prices.
The FSA said: "In response to the survey's finding the FSA has put the record straight by pointing out that advice has never been free. Consumers have always paid for the advice they receive, but they often didn't understand the mechanism through which they paid for it."
Watchdogs have been concerned that advisers have in the past used payments through commission to steer customers to products which paid them the most, rather than what was in the best interests of clients.
It has been feared that the policy of chasing sales and paying "advisers" through commission linked to those sales has played a role in a string of scandals, including the mis-selling of personal pensions, endowment mortgages and split capital investment trusts by financial advisers.
It is hoped that the RDR could eliminate future episodes banning commissions outright.
Industry reaction to the changes has been mixed. Some firms believe it could ultimately provide them with opportunities.
Phil Loney, the chief executive of the mutual insurer Royal London, said he welcomed the elimination of "commission bias" from sales of financial products. But he said: "I am worried that under the current legislative framework it is difficult for the consumer to get access to financial advice."
- 1 Sainsbury's '50p challenge' poster telling staff to encourage customers to spend more placed in shop window instead of staff room
- 2 Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
- 3 Isis an hour away from Baghdad - with no sign of Iraq army being able to make a successful counter-attack
- 4 Yes, the iPhone 6 is a miracle, but it's Apple's tax affairs that deserve a double take
- 5 Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
Isis could become 'world’s first truly terrorist state' and bomb UK with nuclear and chemical weapons, Theresa May warns
Car tax disc changes: Five facts you never knew about your (almost obsolete) tax disc
Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
Isis an hour away from Baghdad - with no sign of Iraq army being able to make a successful counter-attack
Isis, we are told, is a 'clear and dangerous threat to our way of life'. I’m sorry, but I just don’t buy it
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
The Osborne Ultimatum: Chancellor’s benefits freeze bombshell will affect ten million households
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Should gay sex be illegal? 16% of Britons think so
Mark Reckless becomes second Tory MP to defect to Ukip in a month
- < Previous
- Next >
iJobs Money & Business
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...
£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...
Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...