| These days, most people with be familiar | | | | conventionally, this has been the most |
| enough with the term to know that an | | | | usual method of paying for the |
| independent financial advisor is obliged | | | | Independent Financial Advisor's |
| to give impartial advice to clients on | | | | services. Nowadays, however, the amount |
| financial services and products across | | | | of commission received must be disclosed |
| the board of the entire financial | | | | by the advisor, who will also explain |
| services market. Most people will also | | | | whether that commission is deducted from |
| have come to expect that that advice is | | | | the amount being invested by the client |
| generally offered free of charge. | | | | or whether it is included in the cost of |
| Perhaps fewer people will be aware, | | | | the investment. Either way, of course, |
| however, that although clients can | | | | the client is effectively paying for |
| indeed choose to receive "free" they can | | | | this commission. This puts a rather |
| equally well choose to pay a fee for it. | | | | different slant on the concept of "free" |
| Why pay a fee for a service that is | | | | advice; Fees paid directly to the |
| otherwise offered free of charge? The | | | | Independent Financial Advisor - although |
| answer, of course, lies in the fact that | | | | this arrangement is still probably less |
| the Independent Financial Advisor also | | | | usual, it is an alternative that must be |
| has to make a living. Good, professional | | | | offered by the advisor. The actual fees |
| and expert advice does not come entirely | | | | charged will, of course, depend on the |
| "free". If it is provided free of charge | | | | amount and type of investment being made |
| to the individual client, therefore, the | | | | and how complex is the advice needed. It |
| advisor covers the cost of that advice | | | | can prove cheaper than paying a |
| by taking a commission from the provider | | | | commission and the client can be |
| of those financial products he sells. | | | | entirely reassured about the objectivity |
| There is nothing intrinsically wrong or | | | | of the advice, without worrying that the |
| underhand in such an arrangement, but | | | | advisor is somehow influenced by a |
| many will argue that it is important for | | | | commission he could earn from a |
| the consulting client not only to be | | | | particular provider. Commission and fee |
| aware of the fact, but also to have the | | | | - thanks to the transparency of the |
| option of paying the Independent | | | | relationship between advisor, client and |
| Financial Advisor directly for his | | | | providers, it is also possible to have a |
| services. In this way, the client can be | | | | combination of both commission and fees. |
| assured that there is absolutely no way | | | | This breakdown of the actual cost of the |
| that the advice can be influenced by the | | | | advice being provided by the Independent |
| prospect of an advisor's commission on | | | | Financial Advisor makes it much easier |
| what is being bought. Since July 2005, | | | | for the client to compare the real |
| therefore, the regulatory body - the | | | | profitability of any chosen investment |
| Financial Services Authority - has made | | | | decision. |
| it a condition that all licensed | | | | Sean Horton is a Director of Enhanced |
| Independent Financial Advisors must give | | | | Wealth, a whole of market mortgage |
| their clients the choice of paying a fee | | | | broker and independent financial |
| for their advice. Therefore, the advisor | | | | advisor specialising in mortgage advice |
| has three ways of earning his | | | | and the associated areas of income |
| professional fees: Commission from the | | | | protection, mortgage protection, and |
| provider of financial products - | | | | mortgage life cover. |