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Aifa fears adviser charging will isolate Britain from EU partners

Association of Independent Financial Advisers director Robert Sinclair says proposals for adviser charging in the RDR could leave Britain isolated from its EU partners.

Speaking at an all-party parliamentary group on insurance and financial services meeting at the House of Commons yesterday, Sinclair said while Aifa shares concerns around commission, FSA proposals for adviser charging could leave Britain standing alone in this area because some EU partners take commission for investment business.

He said: “We share concerns around commission. But our major concern is that the EU is about to commence a major piece of work on packaged retail investment products which will cut across Mifid and Insurance Mediation Directive. We expect that to have a fundamental change because most of our European partners want to maintain commission  in the investment environment.

“We are concerned that it will leave Britain standing alone in this area and we do not want to go through a process that leaves us isolated and for our providers who may decide that they do not want to play.”

Sinclair also aired concerns over the FSA’s emphasis on exams. He said: “The FSA is absolutely right in saying that an increase in professionalism is required.”

But he added: “I think one of the key challenges for us is to find our way through this mess of examinations to actual work based assessments.”

Sinclair also described the looming 2012 deadline as a cliff edge for the adviser community. He said: “We are becoming concerned with the date of 2012 for a number of reasons. It is a cliff edge set of dates now in terms of qualifications, changing systems and the capital requirements for firms.

“Another thing is how do we get consumers to the point where they value advice. Our concern is that, by having a cliff edge date for this, we are going to end up with people not taking advice because the feel they do not want to pay. There will be a load of people who end up surfing the internet and fall prey to those who not regulated and controlled in the same way.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. How many of you wish most of the RDR would just fade away? Who started this ball rolling?

    Could MM run a poll?

  2. Commission is the cost of advice built into the pricing of a product and, as I understand it, the FSA has not proposed that this should be outlawed. All the FSA has said is that the mechanisms by which the cost of advice built into a product operate should be clarified and that the amounts involved should be subject to specific client agreement. Also, that the amount paid to the adviser should not be determined by the provider.

    For advisers (of any complexion) who already obtain agreement from their clients to the amount of commission they propose taking, I cannot see how the transition to CAR or AC or whatever the FSA finally decide to call it is likely to cause any problems. Commission of 7.5% on an investment of £100,000 costs the investor £7,500 and if the investor considers that to be excessive in relation to the services provided, then s/he should be empowered to have that sum reduced to a more appropriate/ acceptable level.

    If the client would not be prepared to write a cheque for a fee of £7,500 then what is the justification for commission of £7,500? I just don’t see how anyone can argue against that.

  3. While I agree with part of your post Julian, I think the use of a figure of 7.5% is misleading. I have never taken commission near that level. Expanding your point, how can a Client possibly determine what is or is not an acceptable level of remuneration? Surely, in commercial terms, the Adviser company should be able to determine remuneration based on their costs. What there is a danger of is clients creating “bun fights” between Advisers in an attempt to drive perceived costs down with the resultant negative effect on earnings at a time when costs are increasing due to the range of changes in the RDR. This will lead to Advisers leaving the industry, restricting access to advice and leaving the consumer potentially worse off than before!

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