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Huge cost of lower-tier advice

Lower-tier advisers would have to reach “super-human” levels of productivity, achieving £480,000 in annual sales for the first three years just to break even, according to global consultancy AT Kearney.

Writing in this week&#39s Money Marketing, AT Kearney principal Gerard Sharkey says it would be nearly impossible for the FSA&#39s proposals to be commercially viable because of the low commission available on the type of products such an adviser would be allowed to sell.

He says the bag of “safe” products would include stakeholder and Catmarked Isas, both of which have a price cap of 1 per cent, limiting potential revenue, plus term cover and traditional annuities.

Other than generating £480,000 in annual turnover, he believes that the only other option would be to charge a case fee of £110 per client, which would go against the very nature of the proposal.

Until the FSA presents more details of its proposals, neither IFAs nor direct salesforces would be interested in taking part in the scheme, says the consultancy.

Sharkey says: “What really needs to happen is the FSA has to engage with the industry to convince providers to look to the internet to launch propositions as it is the only way that it is going to work.”

Sofa chairman John Porteous says: “I cannot see £480,000 of revenue coming from that end of the market. Just think about the sheer logistics of seeing that many people. You would end up selling products rather than giving advice at the lower end of the market despite the fact that these people are in the most need of advice.”

FSA spokeswoman Jackie Blyth says: The proposals in CP121 are green proposals and we have not fleshed them out in any way yet.”

•CA lower-tier plan, p3, Comment, p33


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