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Ban on commission would widen savings gap

Abolition of initial commission would force 28 per cent of IFAs out of business and widen the savings gap by £4bn, according to the ABI-commissioned Oliver, Wyman & Co report.

Many of the rest would be driven to become multi-ties to survive while a wholesale ban of initial and fund-based commission would drive half of IFAs out of the market.

The full report seen by Money Marketing makes a number of key policy suggestions, such as compelling employers to pay for advice to generate £11bn a year. A ban on initial commission in favour of fund-related remuneration would hit the annual savings total by £2bn. Banning commission entirely would reduce savings by £4bn, it predicts.

The report concludes: “Depolarisation may be seen then as involving potentially major – and largely unforeseeable – change in industry structure in return for little consumer benefit.”

ABI head of media and political affairs Alan Leaman says: “The report has been sent to the FSA, Treasury, Department for Work and Pensions. We really hope the policy implications of the research will be chewed over and discussed.”

Wentworth Rose managing director Philip Rose says: “The savings gap figures will not come as a surprise for anyone who has been advising. People want two things – quality products and reassurance. Without the mixture of fees and commission available, there is a real danger the lower end of the market will fall prey to direct salesforces or not save at all.”

Comment, p27

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