How are financial advisers paid?

Prior to 2013, advisers were paid through a combination of commission for arranging investments, pensions or insurance, or alternatively they could take a fee for providing their advice.

Since 2013, commission on pensions and investments has been banned, so all fees should now be disclosed as a charge for services rendered rather than differing based on the product(s) set up. The exception to this rule is where the firm is vertically integrated, meaning it advises on products that it manages itself. In such cases, firms still seem to be able to pay advisers from the product’s charges in a way that resembles commission.

Disclosure rules mean that clients should be made fully aware what fees they are paying and to whom. For firms which are not vertically integrated, this usually means that the client should be told about the product-level charges (e.g. platform costs, trading costs), investment management charges, including underlying costs of the holdings, and advice charges. In essence any charges that arise as a result of the advice should be disclosed to allow the client to make a fully informed decision.