A new survey of Britain’s wealth advisors says more than half will be influenced by commissions paid by product companies. Tulip – the research company which focuses on high net worth individuals and their advisors – says that 57 per cent of advisors do not make financial planning recommendations on an impartial basis. In a survey of 100 UK IFAs and private asset managers, published yesterday, one in four said that advice is frequently compromised by the payment of incentives to advisors. John Clemens, managing partner of Tulip, says : “These findings highlight the fallacy of so-called free investment advice: advice funded by product commissions rather than fees. “If investors want high quality, skilled, independent advice on allocating their assets, then they have to be prepared to pay for it. Otherwise they will be led into commission-paying, pooled funds. Pooled funds have many values, they help the independent investor to diversify and limit risk, but they also limit choice and encourage investment in high commission paying funds which may not be the best of the bunch.” But the message that advisors are not giving objective recommendations is clear to the investors. The top 1 per cent of investors – the wealthiest 300,000 – frequently ignore the recommendations of IFAs and asset managers and make their own investment decisions. The Tulip assessment says that 22 per cent of all advisors often make investment recommendations based on how much they will earn in commissions. This grows to 25 per cent of advisors who believe that that advice compromised sometimes. Mr Clemens says that the research shows that many investors have done well by choosing their own portfolios of individual company shares, physical property and high interest savings accounts. Tulip looked at the investments made by the ultra-rich in 17 investment categories. It contrasted the asset allocation recommended by professional investment advisors and the actual allocations of the very wealthy, the wealthiest 1 per cent in the UK with average investments of £2 million. This 1 per cent owns more than two thirds of the UK’s £1.6 trillion privately held liquid investments. Advisors recommended a 30 per allocation to unit trusts or OEICS. In practice, the investors allocated 10 per cent. The advisors recommend a 12 per cent allocation to bond funds but the investors allocated 3.5 per cent. The IFAs and asset managers proposed less than a 3 per cent allocation to residential property but the investors allocated three times as much, 9 per cent. Mr Clemens says: “The most significant difference is the predilection of advisers to recommend pooled funds and for the wealthy investor to opt for direct investment: for company shares rather than unit trusts, for residential property rather than property funds, for cash in savings or money market accounts rather than bond or gilt funds. And a core difference is the fact that pooled funds pay commission to advisers; the direct investments mostly do not.”