CUSTOMER AGREED REMUNERATION - CRA International

2.1.2
CUSTOMER AGREED REMUNERATION
Evidence from the focus groups indicated that consumers (both purchasers and non-
purchasers) understood the mechanism through which advice is paid for (typically
recognising that there would be a payment of commission from providers to advisers and
that this would ultimately feed through to product charges) but were less aware of the
actual cost of advice. Indeed, 43% of purchasers reported that they were not told the
cost of their advice by their adviser.
Trust
As is seen from Figure 2, around 50% of today’s consumers trust the financial services
industry. We find that advisers are trusted more than the industry in general and, as
expected, a substantially larger proportion of consumers trust their own adviser. When we
examine this information according to the type of adviser used by the consumer, we find
that trust in consumer’s own advisers is higher in the IFA and insurance sales channel
than in the banking channel.
Figure 2 Trust in the financial services industry
Financial services industry
Financial advisers in general
Your financial adviser (all)
Your financial adviser (bank or
building society)
Your financial adviser (insurance
company or direct sales)
Your financial adviser (IFA)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Trust completely Trust slightly Neither trust nor distrust Distrust slightly Distrust completely
Source: CRA International based on customer survey of 209 purchasers conducted by ORC International.
We also find that non-purchasers are less likely than purchasers to trust the financial
services industry or financial advisers in general.
Evidence from the focus groups found that there was a clear link between the lack of trust
in the industry and current remuneration models. For example, it was commonly believed
that “commission means they will sell you what benefits them the most”. This was most
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