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ABI wants to axe indemnity commission

ABI proposals for indemnity commission to be scrappedhave been attacked by Aifa as being a knee-jerk reaction to the Treasury select committee’s criticism of commission.

Research carried out for the ABI by Charles River Associates calls for the abolition of indemnity commission, production of annual commission statements for consumers and an equalisation of commission levels across products with similar aims.

The radical plans come despite CRA finding no evidence of advisers selling inappropriate products to get commission and only very limited commission-related bias toward particular companies and product types, such as investment bonds over Isas.

The move has split IFA bodies, with the Personal Finance Society backing the report as being good for consumers.

In a further twist, the ABI is calling for responses to be in by May 31, just 24 hours before IFAs are first required to publish the payment menu of charges for consumers.

Aifa director general David Severn says, given the lack of evidence supporting widespread commission bias, the ABI’s paper is an over-thetop effort to ward off any intervention by the FSA or Government.

Severn believes the menu addresses the concerns expressed by the ABI and as such the proposals are unnecessary and the timing inappropriate.

ABI head of regulation and strategy Francis McGee says the Treasury select committee did not report until after this research was commissioned over a year ago but stresses it is better for reforms to be industry-led rather than regulator-led.

Severn says: “It certainly has a sniff about it of a knee-jerk reaction to having had a hard time at the Treasury select committee. The menu is a safeguard for consumers and the ABI is not giving it a chance to work.”

McGee says: “The FSA will formally review the menu in 18 months and I would far rather have an industry debate and proportionate reform before others steam in.”

Informed Choice managing director Nick Bamford adds: “Maybe the ABI should have put people who understand the industry before the Treasury select committee and they would not have got a mauling.”•ABI report, p2; Comment, p37

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