Chadborn says big up-front fees are outdated and potentially crippling to firms if some of the money needs to be clawed back. He says moving to trail for protection is a better route but suggests the industry needs to think of a new way to remunerate advisers.
He says: “The rest of the industry in terms of wealth management and investment is about avoiding up-front commission, providing an ongoing service and getting recurring income. The financial pain of moving from indemnity to non-indemnity is too much for many IFA models to bear, so can there not be a third way?”
Bright Grey managing director Roger Edwards says there are other options such as switching from commission to a procuration fee.
Legal & General IFA sales director Martin Noone suggests the industry could offer a smaller lump sum to be paid alongside trail commission.
Noone says: “We have got no plans to change our commission structure but we support the IFA community and if there is a big enough call to change or increase the options on commission payments, we are flexible.”