The CoreData Research Adviser Fees and Business Models study reveals that advisers who charge £100 or less per hour derive an average of 41.7% of their income from initial commissions on saving and investment products.
The research reveals an approximate 30% of these ‘at risk’ advisers’ incomes can only be attributed to fees (both upfront and on-going).
Almost a quarter of advisers in the UK (23.5%) fall into this group according to the company.
Angele Spiteri Paris, senior consultant at CoreData Research, said: “In an environment of banned initial commissions these advisers could try to either raise their pricing for delivering client advice to make up the shortfall or seek more clients to maintain income levels – a huge challenge in this market.
“Additionally or as a distinct alternative we could see advisers increasing their provision of certain insurance products to clients to generate replacement income streams.”
Higher charging advisers who provide advice at more than £200 per hour source 56.3% of their income from fees - this dearer group of advisers, on average, only derive 24.8% from initial commissions, which contrasts with the income spread of the more economical advisers according to CoreData.
However, this is true for just 10% of UK advisers.
The two groups in between these two extremes will also have income gaps to deal with.
The 40% of advisers who charge between £101 and £150 per hour will be faced with a potential 36% shortfall from providing savings and investment advice according to CoreData.
This is the fee bracket home to the largest group of advisers which suggests that a great proportion of the UK adviser industry will have to adapt.
The quarter of advisers (26.6%) falling into the second most expensive fee band, charging between £151 and £200 per hour, will naturally face less difficulty.
Currently, these advisers see 29.5% of their remuneration come from initial commissions, which although still significant, will have a lesser impact on their business revenue streams.
Spiteri Paris added: “The whole of the advice community needs to change in the face of RDR, but some just have a much more difficult climb ahead of them.”
