From commission broker to fee-based adviser - towards the professionalisation of the independent financial advice and planning sector

Cawdell, Keith E. (2016) From commission broker to fee-based adviser - towards the professionalisation of the independent financial advice and planning sector. DProf thesis, Middlesex University. [Thesis]

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Abstract

The idea that the payment of commission to those working within the financial services sector is not in the interests of consumers is gaining ground. Legislation now exists banning the majority of such payments within the financial advice sector. This work considers compliant strategies that might be employed to the benefit of both the adviser community and their clients.
To ascertain existing attitudes, beliefs and practices amongst advisers and product providers semi-structured interviews were conducted and the existence or absence of recurring themes analysed using Applied Thematic Analysis techniques. The needs, as opposed to wants of consumers were identified by analysing records of what clients had actually done and comparing these with their original requirements.
Analysis showed that product providers’ aims only partly satisfied the needs of consumers and that independent financial advisers are seen as elements of providers’ distribution channels. IFAs espoused the view that they were free from any influence from product providers, without being able to demonstrate what other sources of revenue they had. Furthermore, the income they did receive was usually calculated as a percentage of the value of the investment product sold, both initially and thereafter.
Changes in practice are inevitable for to survive as Independent Financial Advisers and Planners there must be compliance with the regulations that a regulator imposes. Commissions, by any name, will ultimately be replaced by a fees-based service. To comply a knowledge of business management, including cost awareness and product pricing, will be vital. Invoicing clients transparently for the entirety of the service will ensure that businesses operate ethically and have long-term futures that are no longer reliant upon product providers. Furthermore, they will be organised around the constituent parts of the title, “Independent,” “Financial” and “Adviser/Planner.”
This work points towards a practical solution.

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