IFAs believe they are best placed to decide pricing models for clients, research shows

Written by Ray Clancy

Monday, 21 June 2010 10:49

Bundled and unbundled pricing models should be allowed to co-exist with advisors being able to decide which is best for their client, a survey has found.

Some four out of five advisors want to be able to offer both and seven out of ten say that the Financial Services Authority should let them decide while two thirds of IFAs say costs will go up if rebates are banned.

The research from Fidelity FundsNetworkTM was conducted to gauge reaction to the FSA’s Platform Discussion Paper and, specifically, the proposals for the platform industry to move to unbundled only pricing.

The vast majority of advisers, 80%, stated that they are in favour of both platform models co-existing as they have done until now. A further 70% of advisers said that the FSA’s proposals on unbundled and bundled platform pricing are too prescriptive and that they, as the adviser, should be able to make the decision around which model suits their client best.

When asked for more detail about their preferred platform pricing model, 38% of advisers responded saying that bundled was their preferred choice, however, under the proviso that there would be full disclosure around any bias towards funds or providers and full disclosure of what the product provider is paying the platform.

Advisers were then asked if they knew what impact, if any, the banning of rebates would have on investing. Two thirds, 66%, of advisers stated that they believed the abolition of rebates would make the overall cost of investing more expensive.

‘Our research with advisers suggests there is a significant part of the market who are resisting the proposed changes for platforms as part of RDR. It is interesting to see that advisers are vastly favouring a model where unbundled and bundled pricing can co-exist in the marketplace,’ said Ed Dymott, Head of UK Fund Partners at Fidelity International.

‘Fidelity agrees that this is the best consumer outcome and if combined with a standard disclosure policy for all providers and platforms this is more likely to improve levels of transparency, remove conflicts of interest, and ensure costs are minimised. Ultimately we believe that advisers must be able to determine the best pricing model for their customers,’ he explained.

‘Our research shows that advisers also believe that under the current proposals to ban rebates, costs would rise. This is in line with our analysis which suggests that on average, a £10,000 ISA is 37bps more expensive through an unbundled platform. In addition through the loss of rebates advisers will no longer be able to negotiate better terms for their clients, nor benefit from discounts. This surely cannot be a good consumer outcome. At a time when savings rates are at all time lows, increasing cost and complexity in our market can not be a good outcome for advisers or their clients,’ he added.