Make your mind up - Commission or fees

Mark Atherton: IT IS hardly surprising that for every 100 private investors who seek financial advice, about 90 opt to pay through commission rather than fees.

While fee-paying clients face charges of £150 an hour or more for advice, those going down the commission route may appear to escape paying anything at all. Any commission due to their adviser is paid instead by the financial groups whose products they purchase.

The problem is that, in personal finance as in every other walk of life, there is no such thing as a free lunch. In the end the consumer pays. The charges on many financial products are loaded to include a sum earmarked for payment to financial advisers.

Not only do those taking the commission option pay in the end, they cannot be sure that the advice they receive is wholly unbiased. There will always be a suspicion that the recommendations of commission-driven advisers may be skewed towards the products that offer advisers the most money, rather than those best suited to the client’s interests.

In contrast, clients of fee-charging advisers can be confident that they will receive unbiased advice because those giving it will be paid the same amount of money whatever they recommend.

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