Restricted Advisers Charging More than Independent Financial Advisers
A report published in the Financial Advice Business Benchmarks 2021 has revealed that restricted advisers are charging higher fees for their clients than independent financial advisers (IFAs).
The survey consisted of 278 Personal Finance Society (PFS) adviser members and revealed that clients are paying an estimated 0.28% more for restricted advice compared to independent advice, which begs the question why would you restrict your options and pay more to do so.
Additionally, clients of the largest firms (those with more than £500m of assets being managed) pay 0.69% on average for funds, which is 0.12% more expensive than the general average cost of 0.57% for all firms.
What is a ‘restricted’ adviser?
An independent financial adviser can recommend products from the entire market while a restricted adviser can only recommend products from a limited selection. For example, a restricted adviser may only be able work in one market, such as pensions, or may work for one provider and therefore recommend only their products, or are simply limited on the products they can choose from, therefore significantly reducing the options that their clients have.
You can find a more detailed breakdown of the differences between restricted and independent financial advisers here.
What could this mean for financial advice going forward?
Some commentators fear that, with the regulatory burden only increasing, and large bodies such a Schroders Personal Wealth (the newly formed advice firm from Lloyds Bank and Schroders) adopting the restricted model, an increasing number of firms are considering going down the restricted route, due also to costs involved in remaining independent. Additionally, there are concerns that the move to restricted could suffocate smaller restricted firms who will struggle to compete. This would end up hurting clients with increased fees and even less choice.
The conclusion of the move towards restricted advice in the long run means that clients will ultimately end up paying more for less. At TPO, we offer independent financial advice to all our clients as we believe this gives all our clients the best possible outcome. In addition, TPO is an independent advisory firm that has been awarded the exclusive CII Chartered Standard of Excellence, one of the highest standards of professionalism in the financial planning industry.
Take a look at our Why Choose Us page to learn more.
If you’d like to find out more about how we can help you, why not book a free non-committal initial consultation with one of our advisers or give us a call on 0333 323 9065.
Please note: This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. The value of your investments and the income from them can go down as well as up.