FCA: Restricted advisers’ initial charges 20pc higher than independents’

Restricted advisers are levying initial charges averaging 3.57 per cent, around 20 per cent higher than the 2.81 per cent charged by independent advisers, research from the FCA shows.

Publishing its Financial Advice Market Review baseline report today, the regulator says that ongoing charges for restricted advice however are around 12 per cent lower, at 0.63 per cent, compared to 0.72 per cent for individual advisers.

The FCA says the 848 restricted advice firms make up just 15 per cent of all adviser firms by numbers, they represent 39 per cent of revenues levied by advisers because some of the largest firms offer restricted advice. Independent advice is offered by 4,758 firms – 83 per cent of firms – with 2 per cent offering both restricted and independent.

Research carried out for the report found only muted interest in the concept of advice in the workplace, mainly on the grounds of the possible cost and confidentiality, but identified a greater interest in workplace information and guidance. The FCA’s Financial Lives Survey found individuals were generally positive about the information and guidance they obtained through the workplace. Of the 5 per cent of adults that received information or guidance through the workplace, 23 per cent said it helped a lot, and a further 64 per cent said it helped a little.

The research, carried out as a baseline for further monitoring of access to financial advice by those currently not receiving it, found just 6 per cent of the adult population have received regulated financial advice in the last 12 months.

Of those aged over 55 and planning to retire in the next two years, 44 per cent had used at least one form of guidance or information, although only 10 per cent used the Pension Advisory Service and only 7 per cent used Pension Wise. The most used sources of information and guidance were websites and other literature from banks, building societies, insurers and investment providers, used by 10 per cent, with 9 per cent using private sector money advice websites and per cent relying on the media or newspapers and their websites.

For those identified by the FCA as potentially needing advice but not taking it the main reasons for not doing so were not having a need for it, or deciding to make decisions on their own, rather than any explicit issues with accessibility. Half of respondents in this group said they had no need to use an adviser during this time and 28 per cent felt able to make their own decisions. Far fewer said that they had issues accessing financial advice, with just 9 per cent concerned they would not be able to afford to pay the adviser’s charges and only 0.5 per cent saying they were unable to find an adviser willing or able to offer them advice.

The FCA set up the Advice Unit in 2016 following a recommendation from the Financial Advice Market Review to provide regulatory feedback to firms developing automated advice and discretionary investment management models. The unit will now also take in firms developing automated advice models within the mortgage, general insurance and debt advice sectors and will accept firms that want to provide guidance instead of regulated advice as well as firms not intending to seek authorisation.

Ten firms were accepted into the Advice Unit in Summer 2016 – evestor, FinEx Capital Management, HSBC, Lloyds Banking Group, Money Guidance, Mortimer Mackenzie Ltd, National Westminster Bank Plc, Nationwide Building Society, True Potential Investments, Santander.

A second group of seven firms joined in early 2017 – 1825, part of the Standard Life group, Direct Life & Pension Services Limited, Investec Click & Invest, Moneyfarm, Multiply.ai, Personal Touch Financial Services Limited, WealthKernel.

FCA executive director of strategy and competition Christopher Woolard says: “The Advice Unit’s initial work, including the support it has provided to firms, has shown its potential and the changes announced today present a further opportunity to widen consumer access to financial advice and guidance across a broader range of sectors.”