Treasury select committee member Angela Eagle has warned IFAs to expect a radical restructuring of the commission system in the wake of the committee's analysis of the life sector.
Following committee chairman John McFall's attack on life offices last week over endowment misselling, Labour MP Eagle says the committee will recommend in its report to the Treasury on long-term savings that there should be a review on how advisers are paid.
She believes that there is a systemic problem in the way that financial products are sold and wants to see the sales process entirely restructured.
She says she is just one of the MPs on the committee in favour of the commission payment being split into three levels, with a performance-related pay element. She wants to see advisers rewarded for policies that do well for their clients to encourage more focus on suitability.
Eagle believes up-front commission and misselling go hand in hand and she wants to see big payments from life and pension offices straight to advisers stopped.
She believes that Paul Myners and Ron Sandler clearly highlighted the danger of the current remuneration structure when they appeared before the select committee in January, and says she is an advocate of the suite of simplified products.
Eagle concedes that there are a lot of small IFA firms whose livelihood would be threatened by a significant change in the charging structure but sees it as inevitable to tackle endemic misselling.
“Whether we make a recommendation that the industry becomes fee-based or not is horses for courses but I am attracted to the idea of not paying advisers up front.
“Commission-based performance-related payments are also a possibility but we do not want to get too over-elaborate in this area,” she says.