The Financial Services Consumer Panel has sparked fury amongst IFAs after a call to end commission payments over the weekend.
Dozens of advisers have contacted IFAonline to give their views on the commission debate. Most are highly critical of the FSCP’s position.
Ted Millichap, from Prestige Financial Associates, thinks a move to purely fee-based business is bad for customers, adding: "I have had a number of enquiries in recent years from people getting close to retirement, or to repayment day for their mortgage, who have suddenly realised that the figures are not going to add up.
"Those people are - I was going to say glad to pay fees - are aware of the need to pay fees for advice that they need never have had to ask for if they had always been in touch with an adviser.”
Adviser Michael Forbes Bates says there are far easier ways to remove bias than simply switch commission down.
He says: "I suppose that it's too cheap and simple for the regulator to regulate scales of commission e.g. reinforce lautro scales - same commission for same product whoever the supplier is - result; no bias.”
It is not just IFAs who feel the loss of commission will be bad for consumers.
Investor Derrick Fellows contacted IFAonline to say: "It is still often a lot cheaper and better to purchase units trusts, pensions and ISAs via an IFA who offers discounts and choices on annual and renewal fees.
"Take away commission and that will muddy the waters and leave people having to pay more one way or another.”
However, some IFAs say a fee-based business model can work, but still believe commission-based models have a big part to play.
Adviser Chris Welsford, of Ayres Punchard, has converted his business to an entirely fee-based model.
He says: "Making fees compulsory should not necessitate banning commissions.
"The regulator should realise that commission can be made part of a wholly fees-based proposition and many clients are simply not bothered how we are paid so long as we are only paid what we have agreed - and it is a fair price for the work done.”
The first consultation response to the FSA’s Retail Distribution Review, of which the commission debate is a weighty part, is set to start next Tuesday.
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"The regulator in it’s wisdom launched 'Treating Customer Fairly”'and has also fined practice/s that haven’t implemented the scheme so far, yet the FSA fails to acknowledge that it is pushing the consumer towards no choice in terms of how the advice is paid for by providing one route the 'Fee Based', if this is treating customer fairly than the FSA needs to smell the coffee beans!!!!!!!!!!!!!!!!!
I have clients that prefer fee route and others that opt for combination of commission offset against fees and commission only, surely offering choices is 'Treating customer fairly'. No matter which option the client takes they clearly understand they are still paying for the advice whether it’s a direct fee or commission route.
Surely to motivate consumers to take action is to keep the process simple otherwise the regulator will and is putting off clients from providing for themselves and their families.
We are constantly reminded of the savings gap in the UK does the regulator real think that when the consumers aren’t even saving for their future that they can afford to and will pay fee for advice?
The reviews and research that the FSA conduct cannot possibly be with the 80% of the population that can ill afford to save let alone pay fees, providing payment choice creates enterprise and competition in the market place and that will bridge the savings gap." Ash Pankhania, Watermead Financial Ltd.
"These people who call for the scrapping of commission obviously haven’t recently arranged any Mortgages or Insurance for First Time Buyers, Clients in financial distress or Businesses with tight budgets!
The current rules allow people from all walks of life to receive Independent Financial Advice in a manner that best suits their own pocket, whether it is a fee or commission or a mixture of both. And this is what clients want & need, the choice." Andy Morrow, ET Financial Consulting
"Ok so let's ban commission; in which case every product sold in shops, over the internet, indeed anywhere should be treated in the same way. Why single out a purchase of a financial product? What about a car?
So for example, all cars that are sold, brand new and second hand etc should show how much the trader bought the car for, the profit they expect to gain by selling the car at a given price etc etc.
Why don't we do this then? What's the difference? Buy a new car and you lose 25% in the first year, you can't (hopefully!) say that for an investment. So let's regulate the car industry pricing too, shall we?
Yup, I'm up for regulating the price of everything. Why don't they see the issues on this; because they were the same people that helped develop the concept of stakeholder pensions!
Yes of course having a cheap charging pension is going to help people save more for their retirement. What a great idea." Kit Finney, JCF Financial Services Limited
"As a predominantly commission based IFA, I am not entirely averse to a fee based structure. What I resent however, is the implication that we as a profession are not to be trusted....that our advise is essentially money driven and that the poor unsuspecting consumer is in effect receiving a poor deal from us. Withdrawing commissions will not solve the problem if that is the case.
If the profession is riddled with dishonest people, then they will find a way to continue exploiting the poor, unsuspecting customer.
The industry has had its challenges over the years and I believe will continue to face more as it evolves and grows....most professions have. To continue to malign the industry and question the integrity of advisers is not fair.
By and large, IFAs provide their clients and customers with value. Withdraw the commission option and large numbers will avoid seeking advice unless it is forced upon them and until consumers are sufficiently educated as to the need to obtain and thus be willing to pay for ongoing advice.
The well meaning panel has not given sufficient regard to the current mind set of the market place and needs to re-visit the proposition regarding adviser remunerations if the consumer at large is to continue being served by us." Errol Blackman, Integrated Financial MarketingIFAonline
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From 6 April 2019