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Fears over low calculations

Industry reaction is that the FSA’s calculation of market average rates errs on the low side.

Aifa currently has an actuary looking into the figures, which are shown in the table published here on the right, but believes that they look low.

IFAs are concerned that the vast majority of the market is on much higher commission scales.

Park Row head of business development Jo Smith says most national IFAs and networks have negotiated higher commission payments with product providers and will therefore look expensive compared with the averages.

Smith also points to the considerable commission changes that have rocked the market over the last six weeks, saying she is concerned that if the market-average rates are only updated every six months, as the FSA intends, the tables will get out of date very quickly.

Smith says: “A vast proportion of the market is on considerably higher commission scales than those shown. I cannot understand why the market average is so low. Also, if you consider how many consumers have problems working out APR, you have to ask if using this measurement of net present values for commission rates is the best way.”

Aifa director general Paul Smee says: “These figures look on the low side but this is not confirmed. We have currently got an actuary looking at them.”

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