Does product providers' commission influence recommendations?
How do you get truly independent financial advice?
The Financial Services Authority is currently looking at this and is due to publish its recommendations later this month.
At the heart of the review is the question of whether financial advisers who make their money from commission can provide genuine unbiased guidance to consumers.
How would you like to pay for financial advice?
Are you prepared to pay a fee up-front?
Perhaps you would prefer your adviser to be paid commission from the product provider.
Do you trust your adviser to be truly independent?
We asked for your comments, a selection of which are below. The debate is now closed.
MOST RECENT COMMENTS:
As an adviser I think that there are great dangers with the focus on the way and the amount an adviser is paid. Fee only companies are attempting to gain a greater market share by implying that fees are always better, that is not always the case. The clients should concentrate on the cost to them - both initial cost and total annual costs - and what they are getting for their money, it is possible for an adviser to earn more money and provide a better quality or cheaper costing product, which flies in the face of what some people would like the public to believe.
Has Dave Bennett ever bought a financial product? The car salesman analogy is completely misleading - can you imagine a car salesman selling a Skoda at the same price as a Rolls Royce and telling you that in forty years it will be worth more? And can you imagine yourself believing that he isn't getting a fat commission for telling such a whopper? Please!
Steve Ollerton, Darwen, Lancashire
Changing the landscape to one of "fees only" will discourage many people from seeking professional financial advice and so less people will plan adequately for their retirement and less will have sufficient life assurance to safeguard their family in the event of premature death or serious illness. A successful long term relationship between advisor and customer is not merely transactional and is certainly not based upon how much income is generated for the advisor. Giving the consumer a clear choice is one thing, but outlawing is quite another and surely against competition law. Often customers see nothing wrong in their advisor earning a commission given that they run the risk of not getting anything if the advice is not taken up. Income (in what ever form) is a by-product form looking after a client well. There are clearly some long term issues that are perhaps being ignored here! From a financial advisor with 20 years experience.
Peter Ewart, London
Isabella Ramsey's comments clearly tar all financial advisers with the same brush. This is unfair. Does she now not visit her GP due to Harold Shipman?
Peter Jennings, Southport
I worked as an IFA between 1984 and 2004 - for the majority of that time as a commission earning IFA and laterly in a fee charging IFA. Both businesses aspired to the highest professional standards, however there is a "design fault" within the commission system which undermines its validity. Commission based advice relies upon a transaction to generate income and consequently far too much of the adviser's energy is spent identifying and justifying potential transactions because that is how they earn their wages. Advisers should charge for their knowledge and planning as other profession do. That is the only way that advice can be truly impartial. I can now view the financial services sector as a client and I can assure you that my adviser is remunerated by fees!
Chris Shaw, Bath
Before I enlisted the services of my so called Independent Financial Advisor, I told him that the reason I had switched from my previous IFA was because of the commission I was charged at the time. Despite that, the present IFA charged me commission and a fee for his services, as I later discovered. The choice of a charge for advice was never offered. People may say I was naïve - maybe so - but then I placed my trust in him and the basis of all communication is trust.
Reg Proudfoot, Whaley Bridge
When I first took out a bond the advisor was paid a fee by the provider. When several years later after doing my own investigation I wished to take out another bond with the same provider. They then told me they were going to pay the original adviser, who I had not heard from since the initial advice, a substantial amount. so I stopped the investment as this did not appear right though apparently legal. When I withdrew the investment he still got the money for doing nothing. Is this why the financial system is in trouble?
Kochen, Leigh on sea, Essex
It was surprising that Towry Law's clients were happy to pay fees for advice, but the clue probably lies with their example of a person investing a lump sum of £100,000 in one product. I suspect that they are catering for the top end of the market and that people investing (say) £5,000 would be far less willing to pay a specific fee. Unfortunately commission looks like being with us for a lot longer.
Chris Grey, Guildford
I believe this depends on how much you have to invest. Those better off will get a better deal. Who is going to want to deal with my Open Market Option on my pension pot which has now dropped to just £25K?
Certainly there are plenty of financial advisors out there with very loose morals, and although I would not condone their actions it must be accepted that whether you plan to hand over money for a fridge, satellite TV, a car, a house or a savings plan/investment you should use good judgement of the individuals you speak with, not tolerate pushiness and shop around. The more people you speak with the more you'll understand what you're requirements are. As much as there are dodgy financial planners either within banks or operating independently, caution has not been displayed by investors.
Wes Webb, Hong Kong
How much profit did my local garage make when it sold me my new car? I was not told, so why should my adviser have to tell me what his commission (profit before expenses) will be? All I need to know is what is the price of the product that I am buying. With life insurance, this would clearly be the monthly premium. With pensions and investments it is based on what I can expect to receive in xyz years (after all charges, including the provider). I can compare the total cost or benefits from other providers/advisers and this will lead me to choose which is best for me. So what is the relevance of commission or fees? Like my car I now know what I have to pay for what I can expect to get.
David Bennett, St Columb Major
I went to see a financial adviser at a bank a few years ago. I was told that that there would be no charge in the first place for an initial consultation. I was subsequently harassed by the adviser to make a decision on the advice he gave. I also told him I wanted a "no risk" investment. The outcome of this was that the company which he advised me to invest in, and in which I did subsequently invest, went under and I lost about one third of my investment. I subsequently realized that the adviser had received a very large commission from the provider which I guess was an incentive to all "advisers" as attempt on their part to shore up a failing company. I went to my bank because I had my accounts there and because they advertise themselves as an "ethical" company. I will never again look to a financial adviser as I think I can just as easily give myself poor financial advice and take pot luck in reading newspapers' financial pages.
Isabella Ramsay, London
The comments we publish are not necessarily the views of the BBC but will reflect the balance of views we have received. It is helpful if contributors state if they work for any organisation relevant to an issue discussed. Readers should form their own views on whether messages published represent undeclared interests, or views prompted by a common source.