With the FSA continuing its drive towards principles-based regulation, Steve Pett claimed that the maximum commission agreement should be re-introduced gradually, and that an agreed level of service should be pronounced for brokers.
However, he admitted that if the agreements were introduced immediately there ‘would be enormous structural problems’.
Pett also claimed that there should be an agreed level of service to clients. He explained: “I think a great deal of the problems the FSA sees are caused by a minority of IFAs who take maximum commission but do not provide ongoing service. The cost of providing service has gone up 100-fold since regulation – what used to be a quick chat on the telephone and a ‘yes’ or ‘no’ is now two hours work with a written recommendation. Advisers can no longer promise a lifetime of ‘free’ service.
“The public, the FSA and IFAs need to understand that ongoing service is essential – and very expensive. The position must be clear both for the public, and for advisers, but as costs continue to rise, that is not easy.”
Mike Pendergast, IFA at Zen Financial Services: “Whether you charge depends on your agreement with the client. We don’t charge arrangement fees on top of procuration fees as we do short-term loans, so the client will revisit us, we’ll redo the research to get a new deal, and get paid again. It depends on how you want to run your business.”
