When IFAs are paid by commission, they will be required to provide these benchmark figures in the disclosure (key facts) document at the beginning of the advice process.
The key facts document will provide the consumer with information about the firm’s own maximum commission levels next to the market average for products including collective investments, personal pensions, endowments and annuities.
Firms have until June 1 next year to make the changes but if they choose to switch status during this time they will have to provide the information from that point.
The figures have been calculated using data from all major product providers on the levels of commission actually paid, taking into account cases where product terms are enhanced in return for a lower commission payout.
Aifa has voiced concern in the past over the inclusion of a market average, questioning whether the benefits of its inclusion outweigh the costs of delivery, as it says only a minority of consumers would use the document to shop around. It adds that the comparison between a firm’s maximum rate and the market average could be viewed as unfair, particularly when a firm may only take the maximum occasionally.
FSA director of retail policy Dan Waters says: “The FSA has put these figures into the public domain to enable consumers to see how their adviser’s costs and services compare with the average in the market. The market average will, for the first time, provide consumers with a benchmark for what might be a competitive level of commission and will enable them to shop around and negotiate over the cost of advice.”