Banning commission would put financial intermediaries under increased pressure and could potentially put them out of business, IFAs have said.
IFAonline readers, responding to a recent online poll asking what effect the banning of commission by the Financial Services Authority would have, clearly stated their belief such a move would mean their businesses would struggle to stay afloat.
Well over 500 readers responded to the straw poll with 350, or 61%, claiming they would struggle to stay in business were commission banned. Meanwhile, a further 182 (32%) intermediaries said banning commission would be detrimental to consumers and provide less choice.
Only 6% of intermediaries believe they would be seen as more professional were they to only charge an up-front fee for advice and less than 1% see the banning of commission having no affect on their business at all.
The results of the poll follow the news the FSA is to conduct a review of the current distribution model amid concerns voiced by the Association of IFAs (AIFA) the regulator is making a second attempt to ban commission two years after it failed to do so in the run up to depolarisation.
Both Clive Briault, managing director of retail markets at the FSA, and the FSA chairman Callum McCarthy, have recently criticised the current distribution model as failing to serve consumers, intermediaries and providers - comments which have been interpreted as a thinly veiled threat that banning commission is once again on the regulator’s agenda.
Walter Merricks, chief ombudsman at the Financial Ombudsman Service also jumped into the fray last week calling the commission model “fundamentally flawed” and stating he was not surprised commission was on the FSA's ”hit list”.
And if there were any doubts battle lines are being formed, AIFA has today announced it has set up a working group of financial services industry experts to consider the issues raised by the FSA in its proposed review of the distribution model. It has asked former Tenet Group chairman Barry Kayes to chair the working group and help coordinate AIFA's response.
Chris Cummings, director general at AIFA, says: "We are taking this review very seriously and have now formed a working group which is tasked with drawing up AIFA’s response.
"Members should not underestimate the importance of this review and the recommendations it may make. It is essential that our response proves not only the value of independent financial advice but also provides robust arguments on transparency, adviser remuneration and capital, and tackles, head on, the tangible steps we will take to address the reputation issues of the financial services industry."
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Matthew West on 020 7484 9893 or email [email protected].IFAonline
£300bn of liabilities
View from the front row
Transfer from occupational scheme
Appointed by FCA and PSR boards