Advisers must ensure clients understand commission to avoid negative backlash
Advisers need to make sure they explain their commission to clients if they want to avoid negative backlash following Ron Sandler's report into the retail savings industry.
The enquiry, headed by former Lloyds of London chief executive Ron Sandler, forms part of the Government's new measures to tackle the productivity gap with the UK's retail savings competitors, looking at issues such as competition and incentives. IFAs face investigation to determine the value of their role in the selling process for longer term savings products such as endowments.
Speaking at the COVER Forum, Paul Smee, director general of the Association of Independent Advisers, said one key area of investigation was intermediary commission and advisers should ensure clients are clear about the reasons why they receive fees to avoid consumer confusion.
'Sandler is questioning whether there is a market for advice and how that market is remunerated. I think we will have a thorough inquiry as to how commission works.
'The IFA community has to get used to ensuring its clients understand what its commission pays for and that it represents good value for money. The number of investors that think commission goes straight into your trouser pocket is quite considerable. I think the sector has got to explain the weight of work and infrastructure of the compliance, research and administration that supports a good advisory business. The more people that understand what goes into the advice process, the more willing they will be to see advisers remunerated,' said Smee.
Shaun Newcomb of intermediary firm Healthguard, said he had no qualms about putting customers in the picture about commission levels.
'I often discuss commission with clients. I do not generally find it a problem, but commissions can be varied, meaning some are easier to explain than others. Customers genuinely value advice and realise they are getting better value than if they had bought direct,' he said.
