Fears for the future scope of the Individual Savings Account are throwing up curious reactions. Now, it seems that charges and commission are taking centre stage. Should they?
Last week, Credit Suisse Asset Management Funds said it would offer up to 5 per cent initial commission on lump-sum Peps. NPI said it planned a no-load guaranteed Pep complete with 3 per cent initial commission.
Can managers really be making money at these levels? Both fund managers are rightly reacting to fears over the demise of Peps. Most advisers would urge investors to take advantage of Peps before they are abolished but is there a danger that there will be a stampede to buy business?
Credit Suisse says it is not buying business and argues that, with ISAs looming, advisers will have to give extra advice. But are such commission levels, described by one IFA as "cheap", really justified? To be fair, Credit Suisse's 5 per cent is the maximum option and advisers can choose to rebate.
The problem that it raises is whether product providers should compete by offering extra commission. The income drawdown market has been hit by concerns that high commission could leave clients worse off than if they had taken an annuity.
Of course, the relationship is between the client and adviser. Product providers can simply say they are offering a tool and an option. Surely this is a cop-out? There has to be some sort of shared responsibility.
Yes, ISAs will mean greater levels of advice but that is part of IFAs' ongoing good service to clients. Surely they do not need to be enticed by extra commission?