Sandler's proposals to redesign the IFA remuneration model are not as harsh as initially thought, sa...
Sandler's proposals to redesign the IFA remuneration model are not as harsh as initially thought, says Paul Smee, director general of the AIFA, because they are broadly based on existing commission rebating.
Although some of Sandler's first comments suggest only fee-based advisers will be recognized under a reformed regime, further details inside his review of the Medium and Long-Term Retail Savings in the UK proposals for remuneration are much more positive than anticipated as Sandler favours only independent advice.
Moreover, further discussion with the Sandler team - after the publication of the report this morning - suggests proposals for advice remuneration would work to the benefit of everyone concerned, says Smee.
What first looks like fee-based advice is in fact plans built on existing commission rebating, which sit broadly between ideas those offered the FSA's CP121 for the Defined Payment System and depolarisation, and those put forward earlier this year by the Association of Independent Financial Advisers.
"[The Treasury officials] are actually saying advice should be delivered by people who are independent financial advisers, which is something many people have been suggesting for a while," says Smee.
"But the focus is still tied to remuneration. There is too much focus on remuneration as a distinct feature of advice. It is an interesting analysis of the industry at a conceptual level. But there is still a little more to work to be done if Sandler's aims are to be achieved."
Recognition that the present regulation of the advice process is too costly and complex seems to have been a welcome acknowledgement from the AIFA, as too have Sandler's request for a clearer definition by the FSA of what constitutes "mis-selling", largely because it is thought criticism of the FSA may calm adviser concerns over the weight of bureaucracy and record keeping.
However, Lord Hunt, outgoing chairman of the AIFA, says there are still concerns about proposals for "stakeholder products" which can be sold without advice and will carry "warnings" to consumers.
"This seems to fly in the face of experience and could reverse the improvements in the overall quality of advice by downplaying its value. The proposals are a dramatic departure from the usual standards of consumer protection and could lead to consumer disillusion down the track. We question whether there is consumer pressure for this approach," says Lord Hunt.
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