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&#39Multi-tie commission gap will be unsustainable&#39

Falcon Group chief executive Allan Rosengren has questioned the sustainability of a future distribution system where multi-ties receive higher commission than IFAs.

He was speaking at a debate on the future of the IFA at Money Marketing Live in Bristol this month.

Rosengren was joined by other leading IFAs from the South west – Kilminster Financial chairman Malcolm Kilminster, White-church Network chairman Kean Seager and Akumulus managing director Steve Kelland – in insisting that if they concentrated on client relationships, IFAs could survive any onslaught from multi-ties.

But Seager told the conference that he believed product providers would typically pay 125 per cent of Lautro rates on an IFA contract and 175 per cent on a multi-tie contract following depolarisation.

Rosengren told the delegates that he believed that the differentials in commission levels were only sustainable in the short term and suggested that the death of the tied salesforces showed how the multi-tied route would eventually prove uneconomic.

He said: “The reason the current model emerged is that providers could not afford to pay the increased levels of remuneration to their direct sales forces. For a piece of business it costs the provider £1,000 to transact through the IFA market but £1,600 to £1,800 through a direct sales team. That is the reality of any sale.There is only a short-term opportunity for product providers to underpay the IFA channel to make the other side look attractive. You cannot maintain that kind of differential for long because the requirement to be profitable in what you do has got to emerge as the dominant factor.”


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Type: Oeic fund of funds Aim: Income and growth by investing in UK bond funds, UK equity funds, property and cash Minimum investment: Lump sum £3,000, monthly £50 Investment split: 52% UK equities, 40% UK fixed interest, 5% property, 3% cash Isa link: Yes Pep transfers: Yes Charges: Initial 5.27%, annual 1.5% Commission: Initial 3%, […]

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