Leading adviser firms are warning that customer-agreed remuneration will not remove product bias.
Speaking at a Money Marketing RDR round table, the chief executives of Bankhall, Sesame and Tenet warned that CAR is a widely misunderstood term and is actually a dressed-up form of commission.
Sesame chief executive Ivan Martin said: “We have somehow got to nail this issue of commission as biasing how and where products are sold. The market thrives on commission which works very well.”
Tenet chief executive Simon Hudson said: “The only thing that needs to change is who decides how much the adviser earns. It should not be the product provider but a decision made between the consumer and the adviser.”
Hudson said this would remove any argument about product bias. He called for a fee-driven structure, whether paid up front or spread out, and said the sustainability of advisers’ businesses would be helped if the industry moved to a form of PAYE.
Bankhall chief executive Peter Mann said: “Providers’ back-office systems and the speed at which they will be able to adopt CAR is different, so the danger is you end up with product bias of a different kind, where you have access to a set of different remuneration models by a set of providers.”
He says providers would be favoured based on their ability to remunerate rather than the quality of the product being offered.
Mann said: “The product charges required to accommodate the significant technology changes will not be abs-orbed by product provider because the margins are thin enough anyway, so they will be passed on to consumers, so the consumer ultimately ends up paying for the thing they did not vote for in the first place.”