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We are eight months into the new world of compulsory fees for financial advice and it seems many of us are far from happy to pay the bill.
Up to one-third of active investors have ditched their financial advisers since behind-the-scenes commission – a company’s reward for advisers who recommended its products -was banished in January, says research firm GfK.
Advisers now have to charge by the hour, typically quoting £160, or take a chunk off your invested assets each year, at an average rate of 2.67%, according to the My Touchstone database. The latter could cost you £1335 if you had a portfolio worth £50,000.
Major investment firms such as Scottish Widows have reported an influx of so-called “orphaned” investors, cut off from their financial adviser because they cannot afford upfront fees, buying directly from the firm. Many are turning to online tools offered by a widening choice of “platforms”, that allow them to take the reins of their portfolio seemingly at a much lower cost.
Willis Owen, the online discount broker, has reported a 115% surge in new business over the last year, suggesting that many are happy to use an “execution only” service that simply lays out funds for you to pick and mix. The biggest player in this market, Hargreaves Lansdown, is now hoping to win over DIY investors by offering a list of 30 funds at exclusively lower prices.
Does all this mean that financial advice is on its way out? Not necessarily. Adviser rating website Vouchedfor, in a recent sample poll, found the vast majority (97%) of advisers saying they have welcomed rather than lost clients since the dawn of the new era.