FSA should make us all charge fees

All intermediaries should live off fees rather than commission and it would be a good thing if the regulator had the bottle to impose this on the industry, says Sue Read

Monty Burn is absolutely right (Mortgage Strategy October 17). Brokers need to charge fees and we need to get over our fear of asking for those fees. But his way of justifying that fee to our clients is simplistic.

Yes, intermediaries generally do a good job for their clients. We offer them a range of products and a service they could not get by trudging up and down the high street. We do offer them tailored solutions and consideration of their situation and requirements. We offer them our care, experience, underwriting knowledge and the benefit of our strong relationships with lenders. We can often also offer them, as he says, exclusive products.

Burn seems to think this should be enough to ‘close down’ a client. Certainly these benefits are powerful, even without the additional attraction of dealing with a person the client likes and trusts.

But many clients remain resistant to fees. Why? I believe it’s a historical problem. The financial services industry got it wrong in the first place by earning a living from commissions rather than on a fee basis.

Much has been said on this subject but that simple, fundamental error lost in the mists of time has had (and will continue to have) an effect on the public perception of our industry that could take generations to change.

IFAs then doubly confused the issue by offering to take commission, a fee, or a combination of both.

To help, we have produced menus of fees and charges, which are supposed to clarify how much we charge and comparing our fees with industry averages but I’m sure 99.99% of clients never bother reading these, let alone understand them.

Even if they do get their heads round the statistics, they will be left wondering why there is such variation in fee amounts and the circumstances in which they apply from firm to firm, and even from adviser to adviser within the same firm.

No wonder clients are baffled and fee resistant. They think we doth protest too much. And we probably do. Because of the way we set ourselves up in the first place, we too are confused. We have no consistent income identity.

Solicitors and accountants got it right. They’ve always worked on a fee basis. No possibility they will be swayed by filthy lucre. Because of this the public has no problem about the basis of their remuneration.

Fees are the only way you can pay for their advice. No justification of method needed, no arguments possible – even if their fees are sometimes extortionate.

It seems to me unless and until all brokers charge fees as standard, we will continue to struggle to persuade clients they should pay them.

It also seems to me that the only way this will happen will be by our regulator imposing it upon us. I don’t believe this would be a bad thing, though it would be controversial. And it would really take some bottle from the Financial Services Authority.