The executive chairman of IFA firm Lighthouse Group says the FSA's Retail Distribution Review is being "hijacked by a debate about commission."
Speaking at the firm's annual conference David Hickey hit out at certain trade bodies for putting advisers under new pressures.
He says: “The impression is being given that it [commission] is excessive and inappropriate, and I have to say together the ABI and the FSA have put the IFA sector on the defensive about commission.”
The debate over commission has been at the forefront of the review ever since the regulator first outlined its aims and objectives.
It has centred around concern commission could encourage bad advice as IFAs would sell high-paying products over those best suited to their clients.
But Hickey does not think the commission debate will be of major concern for three reasons.
Firstly, he says new regulation and legislation will take time to implement and IFAs will have several years to adapt to any new measures proposed in the RDR.
Secondly, several products, such as protection, do not require recurring advice in the short-term and thus any remuneration should be linked to the original sale.
Lastly, Hickey stresses commission is “simply a factoring mechanism” and says large groupings of IFAs will develop new funding models to cope with any new regulations in order to keep their market share.
Aside from worries about RDR, Hickey is troubled by the spread of electronic, asset-holding platforms which, he says, are rapidly aggregating assets from IFA clients in a bid to close the market and rake the lion’s share of recurring revenues.
However, in defence of the IFA sector Hickey adds: "We deal in complex products in our business. The client wants hands-on help and advice – not some half-rehearsed, multiple-choice response from a call centre."
Hickey concluded his speech by calling for the industry to stay ahead of the FSA on recurring revenue, to counter the threat from third-party platforms, and to “keep customers fairly” while also complying with FSA rules to “treat customers fairly”.
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