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Add fees to product charges for commission comparison&#39

Fees should be treated as product charges on key features documents to show their true impact versus commission to policyholders, according to Skandia research.

The research comes ahead of the launch of FSA league tables which places charges as the main point of comparison for consumers and as Ron Sandler begins his review covering commission bias.

Skandia says like-for-like comparisons on the impact of fees on an individual&#39s investments are impossible under the current framework.

Its calculations show that on regular-premium products reduction in yield can be 0.6 per cent lower if fees are paid but up to 3.4 per cent higher on single-contribution products if the policyholder opts for fees.

It says recurring fees can carry heavy costs which offer worse deals than commission, even before the more favour-able tax treatment of commission is taken into account.

Skandia argues that the best way to treat fees is to add them to product charges and feature cash projections after the impact of fees has been calculated on KFDs.

Head of pensions marketing Peter Jordan says: “You can argue until you are blue in the face about fees and commission but there is no way of knowing how the two compare until fees are seen as product charges.”

But IFA Francis Klonowski says: “We need to get rid of the whole idea of fees versus commission. They are not two sides of a battle. Most IFAs who charge fees offset so to inc-

lude fees in KFDs might be totally irrelevant.”

l Jordan, p10

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