German wealth management clients have only just begun to embrace the idea of paying direct fees for financial advice, although the regulatory framework is being set up in Europe to encourage this to remove product-sale bias, according to a poll of 300 individuals.

The survey, carried out by MyPrivateBanking, the web-based networking organisation which represents wealth management clients in Europe, found that about two thirds of respondents knew about fee-only advice but only 13 per cent of them had used such advice in the past and willingness to do so was weak.

Only 10 per cent of investors would be prepared to pay €2,000 (around $2,770) or more to an advisor (regular commission-based advisors get on average substantially more than this out of their clients even though the client is in many cases not aware of it). The level of satisfaction with fee-only advice was about 10 per cent lower than the satisfaction of clients who used regular financial advice, the poll found.

A German private bank which provides such a fee-only business model is Quirin Bank, for example.

The findings are striking because for years, industry figures have claimed that financial advisors should be remunerated by fees – using the same sort of model as a law firm – rather than be paid commission for products sold. In the UK, under the Retail Distribution Review programme of the Financial Services Authority, IFAs are moving to fees, a development designed to make them more objective and professional. It is predicted that up to 20 per cent of IFAs may go out of business as a result of the changes.

“Overall, these [German] results show that while the legal foundations for fee-based advice have been laid, clients are not fully convinced of the advantages of fee-only regimes.” said Steffen Binder, research director of MyPrivateBanking.

The organisation said its survey findings suggest that “fee-only financial advisors must develop clear qualifications and quality standards to position themselves clearly in the market place”.

“The focus should be on the segment of clients with more than €500,000 of investable assets, the group that shows the highest interest in fee-only financial advice,” the organisation said in its statement.

The report said that so far, fee-only advisors in the UK account for about 10 per cent of the total.

As previously reported by this publication, MyPrivateBanking recently launched a service to help private bank clients negotiate down their fees.