High price of financial advice

CONSUMERS seeking independent financial advice face hourly fees of up to £100. The charges for advice in areas such as savings, pensions and mortgages will cause confusion and deter some consumers from seeking help on investments, a report warns.

The Financial Services Authority says advisers will take a fee rather than commission on products they sell. But many people could be so bewildered they refuse to save, wrecking the Government's campaign to encourage workers to take out pensions, says market analyst Datamonitor. The proposals to introduce five types of adviser will cause chaos, it warns in its report.

Darren Oliver, who wrote the report, said: 'People will become confused as to how to get the best advice if these changes come in. They will also be limited in their choice and might go for help to big banks, who may not offer the best array of deals.'

The plethora of financial products available already confuses many people. But they can seek impartial, free advice from Independent Financial Advisers, who turn jargon into plain English and can point to the best product. More than 30% of the population seek their advice. But it is feared the fees will drive many people to advisers tied to a limited number of companies and which may not offer the best deals available.

David Elms, chief executive of Independent Financial Advisers Promotions, said: 'If the FSA proposals are implemented consumer access to independent advice will decline. People will get confused or will make the wrong decision on what to invest in. This will lead to a reduction in the savings group.'

There is a £24bn shortfall in the total savings needed to support the population into old age. Many people do not have pensions and few invest in savings accounts. The FSA decided change was needed for fear IFAs might promote products for which they received the highest commission, a prospect rejected by the IFAs.