Scrapping the payment menu and initial disclosure document will give IFAs a licence to take higher commission rates, especially on pension products, says a leading IFA.
Richard Jacobs, managing director of Richard Jacobs Pensions & Trustee Services, says the menu and IDD acted as a check on IFAs charging high commission. He says: “There are still too many IFAs taking too much commission on pensions. Some of the commission rates are disgustingly high and lead to bad advice.”
Jacobs proposes a return to the maximum commission agreement or similar restriction. But Informed Choice managing director Nick Bamford says that the MCA was thrown out because it was anti-competitive.
He says: “How do you define too much when it comes to charges? It is difficult to say what is too much. The retail distribution review will tackle many of the commission problems and will drive advisers towards fee-based advice. It will be interesting to see how IFAs will choose to communicate their remuneration to clients when it is left up to them. I would still want to use something similar to the menu.”