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‘Commission culture hindering take-up of wrap’

Wrap adoption is being hindered by the IFA market’s over-reliance on commission, according to round table panellists.

Family Office IFA Sebastian Lyle told the Money Marketing Wrap Round Table that the mass IFA market still prefers indemnity commission and does not understand that selling a wrap proposition is a long-term commitment.

He said: “The FSA wants to encourage wrap adoption and believes it is a good thing but from the IFA point of view the real issue over wrap adoption is trying to wean the mass IFA market off indemnity commission.

“It is about trying to get them off jam today towards jam tomorrow. You cannot build a wrap proposition unless you make them understand it is a lifetime relationship where the trail is more important than the initial commission ever is.

“The challenge to the wrap market is to show the IFA market that you can earn a lot more through trail.”

Financial Technology Research Centre director Ian McKenna questioned whether all platforms are fully committed to changing the attitude of IFAs more used to up-front commission.

Helm Godfrey deputy chairman Roger Sanders said the problem is due to older IFAs who are unwilling to change their approach to giving advice.

He said: “A lot of IFAs are going to be retiring in the next five years so are resisting change and sticking to selling products rather than selling advice. Wraps are so important because we do not have a fully functioning retail market here and wrap goes to the heart of that problem.”

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