The Death Knell for Asset-Based Adviser Charges: Why Fixed Fees Are the Future

The financial advice industry stands at a critical juncture. The UK government’s decision to bring inherited pensions within the scope of Inheritance Tax (IHT) is not just a tax change; it marks the demise of asset-based adviser charges. With this shift, advisers must adapt—or risk obsolescence. The only sustainable way forward? Fixed-fee advice that prioritises client outcomes over asset retention.

The Annuity Resurgence: A Game-Changer for Financial Advice

Once dismissed as the outdated, inflexible option, annuities are making a strong comeback. With interest rates at their highest levels in a decade, retirees are seizing the opportunity to lock in guaranteed lifetime income. Sales soared by 24% in 2024, and the momentum is only growing.

Crucially, this resurgence spells trouble for the traditional asset-based advice model. The widespread adoption of annuities means fewer assets remain under management, slashing the revenue streams of firms that rely on ongoing charges. Two-thirds of adviser income currently comes from these fees—fees that annuitisation will largely eliminate. As surplus wealth is gifted or converted into secure income, advisers must shift their focus from managing assets to delivering value through expert, fixed-fee advice.

A Conflict of Interest Exposed

The rise of annuities exposes a longstanding conflict of interest in financial advice. Advisers have historically been incentivised to keep clients in drawdown, ensuring assets remain invested—and ongoing fees continue to flow. But with annuities now offering security, tax efficiency, and competitive rates, the ethical obligation is clear: recommend what’s best for the client, not the adviser’s bottom line.

For firms that have built their business model on percentage-based fees, this shift presents an existential challenge. As Richard Meek of Colmore Partners puts it, “You don’t have to be Einstein to see there’s a tension there. How objective will advisers be if every time they annuitise a client, they wave goodbye to significant ongoing fees?”

The Fixed-Fee Imperative: A Sustainable Future for Advice

The industry must evolve. The days of asset-based fees dictating advice are numbered. Instead, the future lies in transparent, fixed-fee structures that align adviser compensation with client outcomes—not portfolio size.

This model ensures that advice remains impartial, client-centred, and sustainable in a world where annuitisation is increasingly the best option. Fixed fees remove conflicts of interest, fostering trust and reinforcing the adviser’s role as a true fiduciary.

Annuities: The Cornerstone of Future Retirement Planning

Given the government’s move to tax inherited pensions, the case for annuities is stronger than ever. When structured correctly, they offer:

• Tax efficiency – Keeping pension assets within an estate subjects them to IHT, making annuities a strategic tool to avoid unnecessary tax liabilities.
• Cost-effectiveness – Annuities eliminate the need for ongoing adviser investment management fees, ensuring more of the client’s money is spent on securing their future rather than sustaining an adviser’s business model.
• Financial security – Locking in a stable, lifelong income protects clients from market volatility and the risk of outliving their savings.

Impacts on the Targeted Support Framework

The Financial Conduct Authority’s (FCA) Advice Guidance Boundary Review has notably excluded annuities from its current considerations in its targeted support framework.

This omission is concerning, as it risks leaving consumers without essential guidance on a critical component of retirement planning. Annuities provide a guaranteed income for life, offering financial stability in retirement. Without proper advice, individuals may overlook this option, leading to potential misinformed decisions that could adversely affect their financial well-being.​

We propose this with one specific exception. It could be difficult to distinguish a targeted support suggestion to buy a specific annuity from an advised annuity purchase given the degree of personalisation. Buying an annuity is also an irreversible transaction. For these reasons, we propose that firms should not be able to give a targeted support suggestion which goes beyond suggesting an annuity as a method of access. Thereafter, existing rules that currently apply to annuity sales would apply. See: CP24-27, p5.20.

The FCA’s approach to ready-made solutions within targeted support represents a significant shift in consumer engagement, but its exclusion of personalised annuity guidance is a fundamental flaw that must be addressed. While the flexibility granted to firms ensures adaptability, the restriction on annuity recommendations risks creating a mass-market misguidance event.

Annuities are a complex, irreversible decision, yet one of the most critical financial choices retirees will make. Simply suggesting an annuity as a method of access, without further targeted guidance, leaves consumers vulnerable to suboptimal outcomes, poor value selections, and potential financial insecurity.

The argument that targeted support should not extend to personalised annuity recommendations due to their irreversible nature contradicts the very principles of Consumer Duty—ensuring fair value and good outcomes. The lack of specific guidance risks consumers defaulting into unsuitable options or avoiding annuities altogether, which could undermine retirement security.

A more balanced approach would be to permit structured, needs-based guidance that helps consumers understand annuity shapes, features, and potential trade-offs, without crossing into regulated advice. The annual review of the targeted support framework is welcome, but without meaningful intervention on annuities, it risks entrenching poor consumer outcomes rather than improving them. If the FCA is serious about empowering consumers, then its framework must evolve to ensure annuities receive the attention they warrant in delivering long-term financial stability.

The New Standard for Advice

The Financial Conduct Authority (FCA) has long pushed for greater transparency in adviser charges, and the current landscape makes it clear: percentage-based fees are no longer fit for purpose.

For firms willing to embrace change, the opportunity is vast. By transitioning to fixed-fee advice, planners can redefine their value proposition, attract a broader range of clients, and operate with true ethical integrity. Those who resist? They risk becoming relics of a bygone era—sidelined as annuities reshape retirement planning for good.

The message is clear: the future of financial advice is fixed-fee. The time to adapt is now.

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The Benefits of Advice-Only Financial Planning: A Transparent, Ethical Future

The financial planning industry is undergoing a seismic shift towards greater transparency and ethical practice. Traditional fee structures, particularly the assets under management (AUM) model, have long been criticised for potential conflicts of interest. Advice-only financial planning presents a refreshing alternative, ensuring clients receive clear, objective guidance free from hidden incentives.

1. Eliminating Conflicts of Interest

One of the strongest arguments for advice-only financial planning is its ability to reduce conflicts of interest. Unlike AUM-based advisors, who benefit from managing larger client portfolios, advice-only planners charge a transparent, flat fee. This ensures that recommendations are made purely in the client’s best interest, without the incentive to push unnecessary investment products or retain control over assets.

2. Greater Accessibility and Fairness

Traditional financial planning often caters to high-net-worth individuals, leaving many without access to professional financial advice. Advice-only models, particularly those offering hourly or flat fees, make financial guidance more accessible to individuals at all income levels. This shift is essential in an era where financial literacy and stability are more critical than ever.

3. Transparency in Fees and Services

A core tenet of advice-only planning is fee transparency. Clients know exactly what they are paying for, eliminating ambiguity around costs. Unlike commission-based models or AUM fees, which can be hidden or difficult to calculate, a clear fee-for-service structure builds trust and allows clients to make informed decisions.

4. Fiduciary Commitment and Professional Integrity

Advice-only planners operate on a fiduciary basis, meaning they are legally bound to act in their clients’ best interests. While many in the industry claim to follow fiduciary principles, the advice-only model removes financial incentives that could compromise impartiality. This professional integrity ensures that every financial strategy is tailored to the client’s goals rather than the advisor’s profit.

5. Client-Centred Financial Planning

Without the pressure to sell financial products, advice-only planners can focus entirely on holistic financial planning. This includes budgeting, tax strategies, retirement planning, estate planning, and other critical areas beyond investment management. This comprehensive approach helps clients achieve long-term financial well-being.

6. The Growth of a Transparent Financial Industry

The rise of movements advocating for greater transparency, such as the Transparent Advisor Movement, underscores the demand for ethical, fair, and accessible financial advice. These initiatives push for clearer disclosure of services and fees, increased regulatory support for flat-fee structures, and a commitment to consumer advocacy. As more financial professionals adopt this model, the industry as a whole moves towards higher ethical standards.

7. Supporting the Next Generation of Advisors

Advice-only planning provides an ethical and sustainable path for new financial professionals. By offering mentorship, accountability partnerships, and education on running a transparent practice, the advice-only community is helping to shape the future of financial planning. Younger advisors and career changers now have an alternative to traditional commission-based or sales-driven financial services, enabling them to build practices rooted in fairness and integrity.

The Future of Financial Planning is Advice-Only

Financial planning should empower individuals, not exploit them. The advice-only model embodies clarity, integrity, and fairness, ensuring clients receive unbiased guidance tailored to their unique circumstances. As demand for transparency grows, advisors who embrace advice-only planning will lead the transformation towards an ethical and consumer-focused financial industry.

For those seeking truly independent financial advice, or professionals looking to join the movement, the advice-only model offers a path forward—one built on trust, transparency, and unwavering commitment to client well-being.