Industry
The Association of British Insurers (ABI) has announced radical new proposals that could spell the end for commission-based financial advice. Its publication, Financial Advice: How should we pay for it, explores the accusation that commission creates bias among advisers and "proposes practical improvements in ways of paying for financial advice for those who wish to pay through commission."
The document also details how research conducted on behalf of the ABI by Charles River Associates, found no evidence of commission-based advisers recommending products just to maximise commission.
Yet despite such allegations being apparently groundless, the ABI has announced that consultations shall shortly begin to provide customers with more reassurance about the quality of the advice they receive. The announcement has provoked outcry from the intermediary community.
"Given these research findings the Association of Independent Financial Advisers (AIFA) is deeply perplexed as to why the Association of British Insurers thinks that it now needs to 'fix' something when there is no evidence to suggest that consumers would be better served by the new proposals," said David Severn, director general of AIFA.
In the proposals, traditional commission arrangements would be replaced with 'trail' commission that will run only as long as a policy remains in force. Other proposals include annual commission statements for customers, powers to move commission payments between advisers, making commission payments simple and more transparent and a reward for ongoing advice, not just up-front sales.
However, advisers have poured scorn on what they see as more meddling from the ABI. "Once again those who are unelected and ill-informed are telling IFAs how they should effectively work for nothing, while supporting such bodies by paying fees and compliance costs, which sometimes exceed the value of the business we are advising on," said John Joseph, managing director of John Joseph Financial Services.
