The Association of British Insurers wants to ban commission offset for IFAs which would mean less than 2 per cent of advisers would be able to call themselves independent and kill off consumer access to independent advice, according to industry experts.
The ABI is lobbying the FSA for the professional financial planning, or independent, category to be restricted to advisers who charge a pure up-front fee or agree with the client to take the fee out of their investment pot, either in a lump sum or instalments.
ABI assistant director of distribution reform Alex Roy says: “Offsetting commission against the fee would go against the principle of customer-agreed remuneration as it implies provider involvement. The charges must be kept separate and provider commission must be eliminated.”
It is also lobbying for the general financial adviser category to be made temporary, an idea the FSA returned to last week when director of small firms Stephen Bland suggested this could happen if the regulator does not get its way on its controversial capital adequacy and PI reform plans.
Syndaxi Financial Planning managing director Robert Reid, who runs a fee-based business, predicts that less than 2 per cent of all current advisers would be able to move into the top category. He says: “Very, very few advisers would fit into this strict definition of independent. This is all about increasing the profitability of the provider and nothing to do with benefiting the client.”
IFA Promotion chief executive David Elms agrees with Reid’s assessment of the number of advisers who would fit the bill. He says: “If the FSA was to go down this path it would kill consumer access to independent financial advice and how will that be to the benefit of the consumer?”
Scottish Life head of group communications Alasdair Buchanan says: “This is one of the key areas of debate over the next few months but I would suggest that commission offset as part of an agreed remuneration structure between the adviser and client would fit the principles of customer-agreed remuneration.”