Customer agreed remuneration (CAR) will probably succeed in establishing a sustainable model in the marketplace, according to Scottish Life.
The provider’s interim results show a growing demand from IFAs and their clients for transparent and flexible commission structures.
Almost 90% of Scottish Life’s regular premium new business uses a fee-based structure, primarily the Financial Adviser’s Fee (FAF) commission option, a form of CAR. The remaining 13% of cases use the traditional initial commission basis.
Jim Smith, sales director at Scottish Life, says: “The rate at which advisers have switched on to our FAF option, and worked out the best ways to explain it to their clients, has varied from individual to individual. There was a clear group of 'early adopters', so that within a few months of launch, around 30% of our new business was being written on the FAF basis.
“In the subsequent couple of years we saw a steady rise to about 70%, since when the proportion has increased to just under 90%. This level of take up demonstrates a clear acceptance by advisers and their clients of the benefits of having a more transparent and flexible approach to commission structures."
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