To adapt a slogan from President Clinton's election campaign: “It's the distribution, stupid.”
It is clear that IFAs and product providers and, on a good day, the FSA understand this. The Government does not. But that's another story.
Fidelity is certainly concerned, as revealed by its action to deny access to brokers which rebate renewal commission.
The question is how much should providers seek to influence distribution. Fidelity has joined Threadneedle in acting to prevent IFAs from being undercut by other brokers. Threadneedle guaranteed one commission rate to all IFAs. Fidelity's move is more specifically targeted.
Its rationale is that rebating renewal comm ission could force other IFAs to do the same or put them out of business. It must be concerned the practice operated by a limited number of intermediaries is set to spread.
Advice is worth the money and should be extended, not restricted. The 0.5 per cent renewal seems a fair amount if IFAs' advice is ongoing. Renewals also stimulate a competitive market for follow-up advice if the original IFA neglects its clients.
On the life and pension side, we have seen problems with “advice black holes”, such as Abbey Life, where renewal has not been paid.
But where it gets interesting is over Fidelity's claim that renewal is for an adviser and so cannot go to the client.
Despite misgivings about providers trying to control how intermediaries use their remuneration, in these limited circumstances, we support Fidelity's position and think IFAs should too.