We were told the same thing - our son was outgrowing rec and needing to get a little more challenge. He's turning 8 tomorrow, but has been playing select since last summer at age 7. The nice thing about playing academy/select is that it is more advanced. There are more kids on the field, the fields are bigger and it utilizes a goalie. I know in rec we still weren't using a goalie! Also you PAY your coach. We have a coach that has training in soccer and works hard with our kids. In rec, it was really a toss-up. Luckily we ended up with a GREAT coach in rec, but I know that's not always the case. The other issue I see in rec is if you have problem players, you can not get them removed from your team. We had some problem players in which our coach could NOT get removed from our rec team. With select/academy you don't have that issue.
My son plays for Liverpool and we are very happy with our coach, and the organization. It requires a cost commitment, but it also includes all the lessons twice a week - in which my son has learned great foot work skills and how to pass and other things needed for playing better soccer in games.
I've seen obnoxious parents but our team we are on everyone is extremely positive about the kids. In fact the coach and/or team manager will contact parents in our organization that are acting out of hand.
We see a lot better players playing in the leagues we play in now, so it pushes my son to play better. Some of the kids that play are amazing at this age.
It is harder on your kids entering select/academy because at rec, they are used to being the best or at least one of the better players. In select/academy you'll notice that isn't always the case and can the realization can be confusing and hard on a child. It's a good learning lesson though.
Good luck with your decision.