The many ways in which providers are remunerating advisers are "restricting choice and pushing up costs" for clients, according to the director of one advice firm.
Chartered financial planner and director of Clayton Financial Planning, Rory Clayton, said the many ways in which providers are renumerating advisers since the introduction of the Retail Distribution Review (RDR) is causing problems.
He said: "Before you advise a client on any product, you must ascertain what the provider is doing with the product regarding ongoing commission - this research in itself costs money.
"For example, one of my clients wanted to increase his pension contributions - he has three pension policies.
"The first provider never paid a premium commission, the second currently pays a small commission on the premium but this will cease if it is topped up in any way.
"The third provider told us that the existing commission on the premium would remain in place, but only if the client writes to the provider directly [the top up will be non advised]. If I, as the adviser, approach the provider, it would stop.
"The trigger events that stop the commission being paid for the second and third provider are different, the providers have interpreted the rules differently."
"All of this affects how much the client pays me and makes it impossible to give an estimate of costs up front. I have made seven phone calls on this case - which again the client pays for."
Similarly, and more generally, Clayton explained that switching a pension fund will see advisers lose ongoing trail commission and this must be accommodated into an financial adviser fee, which again pushes up the cost of advice.
A second issue is that a number of investment providers charge 'factory gate' prices and do not offer adviser charging facilities.
As a result consumers are being funnelled into wraps and fund supermarkets whether it suits them or not, because they all provide adviser-charging facilities, according to Clayton.
He added: "The RDR just hasn't achieved the better client outcomes it set out to achieve."
Three years at Wells Fargo
Effective from 9 December 2019
One firm with permission suspensions left
Continuing the Architas education series for clients.
Needs to apply for authorisation