Should IFA Fees Be Performance Related ?

Written by Karen Bryan

should independent financial advisors fees performance relatedI’ve been thinking about the role of independent financial advisers (IFAs) in the UK. From January 2013 they will have to charge a fee versus relying on commission from financial products that they recommend to clients. I think this is a good move toward transparency.

Would any independent financial advisers be willing to put their money where their mouth is and offer their clients some sort of performance related guarantees for stock market related investments? For example a (partial) refund of fees if the investment doesn’t reach a certain level over an agreed period of time. There could also be a bonus payment to the IFA if the investment they recommended did better than projected. That sort of fee structure would encourage me to use an IFA.

I’d like to see is IFAs taking some more financial responsiblity for their advice. At present, it seems to me that the investor is the one risking their cash when buying shares and other types of stock market investments, yet IFAs get their fees whether their client’s investment loses or gains value.