Product charges in the financial industry have always been a topic of much debate. After all purchasing personal financial products is not that same as almost any other product where you would expect to have the price clearly labeled. Typically a financial product is purchased through an intermediary such as a financial adviser, an online service or if you really have to then a bank. These intermediaries will often take a commission that is paid by the product provider, as remuneration for the sale.
In order to fund this commission payment to the intermediary the product provider will charge you an initial commission when you first purchase the product. This will fund the intermediary's payment as well as the product provider's cut.
If you purchase the product directly from the provider eg a personal pension or ISA from Legal & General, life insurance from Friends Provident or a unit trust from Aberdeen, then that product provider will not, as you might expect, charge a lower initial commission because you cut out the middle man. Instead they will simply keep a larger share, well, all of it, for themselves.
This is the reason why discount brokers are a cheaper alternative to purchasing financial products through either a financial adviser or going directly to the product provider. This is because discount brokers take the full commission the product provider will pay them and rebate some or all of that commission back to you. This way you are minimising the commission that the product provider gets to keep and earning yourself a good deal.
What's more if you purchase a financial product through a financial planner then you have the right to approach the Financial Ombudsman if in the future you feel something was not right about the product or the way in which it was sold to you. That is because you will have gotten advice from the financial planner as to which product is best for you and so you can have safety in the knowledge that someone else recommended it. If you make your own decisions and go directly to the provider then you have no one to blame but yourself. If you purchase a product directly through a provider then you have no rights to complain as the purchase was made by you without any assistance from a third party.