Most UK financial advisers remain dependant on initial commission despite a marked shift toward a "new model" of holistic financial planning, research suggests.
According to the latest Financial Planning Index from Skandia, most advisers (61%) have less than 40% recurring income, suggesting they are mostly remunerated from initial commission.
Of those, 29% receive less than 20% of their revenue from recurring while 32% receive between 21% and 40%.
The results are broadly in line with an online Skandia survey of 500 advisers in August last year, which suggested 59% of remuneration comes from initial commission, with 26% from trail commission and 12% from fees.
However, Skandia says the 39% of respondents who have achieved more than 40% recurring income, which it deems fees or trail or fund-based commission, represents "good progress".
Elsewhere, of the 90% of advisers now using a platform, almost seven in ten use more than one, a shift driven by client segmentation, Skandia says,
"The trends emerging from this research and our own experience tell us the transition to the new model is now occurring across the market but that firms are at different stages and are adopting different processes and procedures," says Peter Jordan, head of proposition marketing at Skandia.
Skandia's Financial Planning Index uses a scale of 0 to 100, with zero representing a pure transactional approach and 100 being "true" holistic wealth management, and is based on the answers of 230 advisers.
It says a transactional model is where the focus is on the purchase of a product to meet a specific client need for that product, whereas a holistic model focuses on the management and constant review of a client's financial affairs.
According to Skandia, financial advisers are increasingly looking to move their businesses away from a purely transactional business model, with the advice sector as a whole achieving a score of 55.
It adds 75% of financial advisers provide the majority of their clients will a full risk assessment and asset allocation as part of a defined investment process. Only 5% do not provide this to any clients, it says.
"Using a defined investment process for the majority of clients indicates that advisers are adopting a holistic approach wherever possible," Jordan adds.
"The move to the new model has started and will gather pace as the regulatory landscape becomes clearer. Understanding that pace of change, the obstacles standing in the way and appreciating what support is needed to work through the transition is critical."IFAonline
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