RDR: Industry welcomes FSA's commission decision on protection
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Advisers and insurers have welcomed the FSA’s decision to allow commission to stay on protection products.
In today’s RDR paper, the FSA said it will not introduce adviser charging into protection but will require firms to disclose any commission payment where pure protection is sold at the same time as investment advice.
Axxis Financial Planning director Owen Wintersgill says: “It is good to know that the regulator and all parties concerned are finally realising some financial services products, such as protection, are absolutely sold not bought.
“Removing commission would quite simply decimate the amount of protection contracts that people are taking out. It would be completely counter-productive and nobody would pay a fee for advice on protection.”
P3 Wealth Management managing director Frank O’Donnell says today’s decision makes sense. He adds: “If you had to pay a fee for protection advice then the chances are the consumer will not take a policy out so for that reason, it makes a lot of sense.”
Lifesearch senior policy adviser Matt Morris says he is not surprised that commission remains, adding it was the only sensible decision if the FSA was to avoid “killing off protection advice”.
He says: “On this occasion the FSA have got it spot-on. Not only is commission not detrimental in protection sales, it is an essential tool that benefits the consumer and helps the adviser.”
Friends Provident chief executive Trevor Matthews says the FSA’s main conclusion not to apply adviser charging for pure protection products is the “right choice”.
He says: “I fully endorse the FSA’s decision not to apply adviser charging on pure protection products.”
Bright Grey and Scottish Provident proposition director Roger Edwards says: “This is the response we were hoping for and it is definitely the right response. The danger was that banning commission in the protection space would lead to reduced sales because people would not pay a fee to be told to buy a cheap term assurance.
“I think the majority of advisers will welcome this news.”
However, Calculis director Alex Pegley has concerns with today’s RDR paper. He says: “It counters the whole concept of moving to a customer agreed remuneration world. If we’re going to do this, then lets go all fees.
“It is further watering down and the FSA has obviously been nobbled by some persons. They should just scrap commission.”
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Readers' comments (4)
Anonymous | 16 Dec 2009 1:42 pm
I hope the FSA monitors the 'fee only' brigade who don't 'sell' protection because they don't make any money on it.
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Evan Owen | 16 Dec 2009 1:50 pm
I had assumed that by now the likes of Mr Pegley must have realised that they are out of step with the majority both within this industry and without, clearly some more work is required in order to bring this fact home to them.
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Chris B | 17 Dec 2009 2:40 pm
It is both feasible and practical to arrange protection policies on a fee-only basis and it is something that I do on a regular basis. The plans are then set up with reduction in premiums as a result.
Do I earn as much as if I were being paid the full commission? If it was a large case, then no. If the case was smaller, then I could possbly earn more through fees.
But surely this is missing the point.
My client has approached me to provide solutions to their financial needs and what I am being paid for (and this is what I have agreed with the client at the outset) is my time and expertise which is set at a rate I feel to be appropriate and not dictated by the insurer/provider.
I appreciate that others will have different business models and have no gripe with those who want to continue to sell policies and earn commission from them. But perhaps a modicum of understanding is in order for those of us who have a different approach.
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Anonymous | 18 Dec 2009 12:37 pm
A very refreshing conclusion and protects people who can't afford to pay fees, which is about 75% of the general public.
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