Widespread adoption of the factory-gate pricing model by adviser firms is "probable" following the conclusion of the Retail Distribution Review, says Winterthur.
The life provider says while the remuneration method raises some eyebrows across the industry, IFAs shouldn’t be concerned about its effects on their businesses.
Winterthur offers advisers a version of factory-gate - its Flexible Adviser Remuneration (FAR) – which it says has been welcomed by some.
Factory-gate pricing professes to improve transparency between the adviser and consumer as any advice charges are explicitly agreed between them.
But, again, the concept seems to stand against commission, suggesting itself immune to provider bias. It is not overwhelmingly popular.
But David Thompson, managing director at Winterthur, says factory-gate has a place in the industry.
“Winterthur’s FAR system proves that advisers can successfully adapt their business model,” he says.
“Whilst this might not be appropriate for every adviser at this current time I do think that advisers need to plan ahead and to try out this model.”
He adds: “I would urge any advisers who are concerned about the impact of factory gate pricing on their business model and cash flow forecasting to contact Winterthur for advice on how these models can work for them, in order to prepare for the probable introduction of factory gate pricing as a result of the review.”
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"Your article yesterday seems to imply that IFAs would suffer cash-flow problems if they adopted this. Our experience is not so, however I can understand a problem arising if some IFAs have been taking full insurance bond commission up front. We provide bespoke discretionary investment management services to IFAs and their clients and have found that they are content to take normal unit trust levels of initial commission and trail thereafter in the knowledge that the trail drastically increases the value of their business. Clients are asked to agree the level of remuneration with their adviser and we then pay it from the assets we manage. That way the client gets a personalised investment service and the IFA has much more time to devote to client servicing and new business generation. It must be the way forward." David Cowell, director, Myddleton CroftIFAonline
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