The comments came in response to Aegon Independent Financial Advisers (IFA) Insights Survey, which showed more than 80% of advisers support the idea of a common level of commission to avoid perceptions of provider bias.
Additionally, the survey revealed 88% would be dissatisfied with a total ban on commission as a means of remuneration, while 95% believe commission has a vital role to play because clients are unwilling to pay a fee for advice.
Brett Davidson, managing director of FP Advance, commented: “It is refreshing, but I have to say not surprising, to see these results from IFAs. We work extensively across the IFA market and are finding that the vast majority of IFAs are looking for ways to move to a recurring income model. The major sticking point is ‘how’ to achieve this move with pressures on up-front cash flows. However as our clients have seen, you don’t need to re-mortgage your house and sell your children to make the transition, you simply need a considered transition plan.”
Like the majority of IFA respondents in the survey, FP Advance does not favour a ban on commission. It said the real issue is not whether clients pay by fee or commission, but is more about transparency and value. FP Advance stated the client is the only person that ever pays for advice regardless of how that payment is collected; a fact that the FSA would do well to publicise in its financial capability work over the next 12 months.
It added advisers must be clear about what clients will receive for the costs of advice and be better at explaining where they really add value.
FP Advanced added helping IFAs build a more effective business model would seem to be the number one priority in the industry at present. The government and the FSA need good advice to exist in the marketplace and IFAs are the best way for this to eventuate, but there is work to be done. FP Advance said once the regulatory framework is established to weed out the sharks the next wave should be focused on accentuating the positives that already exist in the advice market and developing business and educational skills within the IFA community.
