The Fee-Only Network exists to support financial advice which serves the public well. We believe that there is a role for IFAs, stockbrokers, banks, life companies and their agents, and a distinct part to play by fee-only financial planners in the same way that doctors, pharmacists, and pharmaceutical companies work well enough together.
Fee-Only financial advice is defined by us as that delivered by a firm with no 'agencies', by which we mean no 'sales agreements with financial institutions', nor commission income. This excludes 'fee-offset' and 'fee-based' compensation methods as is normal in every other country but the UK, where the Financial Services Authority has regretfully mixed the two.
In the USA, there are about 5,000 NAPFA members (the USA trade association for fee-only advisors) and about 200,000 financial advisors. In Holland there are about 30 fee-only firms and about 30,000 financial advisors. In the UK, fee-only firms include wealth managers, private banks and stockbrokers. The business model to sell packaged financial products has until recently been profitable and simpler to organise: but now needs non-aligned competitive pressure from a professional body to provide awareness, and a commercial reason to improve value-for-money.
If there are no agencies, how can an IFA do business?
This is a common question amd there is no way to answer it but to explain that there is in fact a large difference in the advice offered by a financial panner and that offered by an IFA. One is a sales operation designed for the mass and affluent markets, and aimed at the majority of people who want a 'packaged solution' with no input from them: and the other is wealth management aimed at delivering a lifestyle solution. These businesses have different standards, different training, and end up giving different advice. The Fee-Only Network provides a MasterClass for planners and principals wishing to create a fee-only business.
Why are you teaching people how to avoid paying commission?
To be more exact, we are educating the public on their choices, and that supports both the life companies and their IFA agents, and the fee-only sector by helping people make informed choices. Some members of the public want to control and engage with their money, and many do not. Those who do have always found it difficult to seek out advisers that actively work to reduce the cost of the client doing businesss. The Fee-Only Registry is a source of advisers that suit those people who want to control their money.
Isn't it ridiculous to expect members of the public to engage in a six hour course?
No. We spend as much time on other basic material such as health, hygeine and much more on gardening. The reward for learning about money is to pay less in annual fees, and to gain in confidence.
How does an individual know if they will benefit from the public course?
Read the book. If it appeals to you, you'll find out in the first few pages. There are 150 pages.
Are you expecting IFAs to sell only products that earn no commission?
No. Clearly not, and this question is common but nevertheless surprising. We are not offering an improvement course for IFAs. This is a different business on professional lines, not selling packaged products, but offering advice on the best way to use one's money and that often avoids using retail solutions. About two thirds of the affluent market prefer to have their financial advisers vie for their business on the basis of personal attention, and with the understanding that they do not want to engage with their money choices. The one third that do engage with their money tend to become aware enough to use their know-how to find better value, and there's every reason why this should be seen as a 'good thing' for the public as a whole.
What about the argument that fee-only advice is more expensive than fee-based or commission-based?
There is a point made by IFAs which is:- "one of the biggest arguments put forward by the pro-commission camp is in the case of pensions. They argue that if commission is taken rather than a fee the advice costs as much as 40% less due to tax relief on pension contributions. We tend to agree with this, which is why the "fee only" camp is missing a trick on behalf of their clients."
There continues to be a mis-understanding that fee-only advisor is simply "an IFA in drag". The IFA business and IFA client will commonly earn £2,000 in initial commission from a personal pension plus renewal commission on top. The Fee-Only client will pay nothing in advisory fees (since he or she will have taken the course), and simply open an account for £150-£250 with one of the wrap accounts mentioned, with no ongoing commission. These are two different business models, for different client types.
Media and press members who would like a comment or briefing should contact Rob Noble-Warren.