Choose how your IFA is paid

Whether you take tied, multi-tied or independent advice, there will always be a cost for your adviser's service. Customers pay for advice in three main ways...

1. by paying the adviser a fee, either at an hourly rate or through a fee for the whole job. This is known as 'fees only' advice. Fees vary, typically from £50 to £200 an hour. Often the first half hour is free at the initial meeting where you can get to know each other.
2. by paying indirectly through commission, which is deducted by the product provider from the products you may take out. Often there is not only a commission charged for setting up a plan but there may also be annual commissions on top, known as trail commission.
3. by paying a combination of fees and commission. The adviser will rebate back into the financial products or hand to you some or all of the commission or offset it against the fee.

Everyone can choose to pay their IFA by a fee rather than commission, if they want to. In the past the majority of consumers tended to opt for commission. In the future there may well be a shift towards more people paying fees and this will be explained under the 'menu' of adviser charging arrangements which your adviser is now required to give to you. Most importantly only an IFA has to offer a choice of payment options i.e. paying by fee or commission or a combination of the two. Tied and multi-tied agents don't have to offer you this choice, but some may.

Menu of charges.

Until recently, buying a financial product from an adviser could be a bit like entering a restaurant that doesn't display its menu in the window and ordering dishes without knowing the prices, whether the choice was a la carte or a fixed price menu, or whether or not the meal included service. You might only become aware of the full cost upon receipt of the bill.

Now customers must receive the menu of the adviser's charges at the moment they first seek the advice. Other documents will also be provided up front to spell out whether the advice is offered on products from a single provider, from a limited selection of providers or from the whole market.

This will make it easier for the consumer to shop around for a competitive service and to know the cost of advice from the outset, and most importantly, assess the value of advice upfront.

The menu should encourage people to shop around for the financial adviser they feel is offering them the most competitive deal.

All financial advisers must hand you this menu of charges up front for you to look at before going any further. Armed with this information you can ask your IFA to explain the charges he or she will make and choose to buy elsewhere if you think it may be better value. This system