IFAs have hit out at Hargreaves Lansdown managing director Peter Hargreaves for say-ing that IFAs face extinction unless they stop taking up-front commission.
Hargreaves warned in Money Marketing recently that IFAs will be “dead as the dodo” within a few years and said the industry cannot survive if it keeps the indemnity commission regime.
But Highclere Financial Services partner Alan Lakey has hit back at Hargreaves, saying discount brokers “inhabit a different world” from other advisers and telling him to “steer clear of these matters”. Lakey says the majority of advisers still rely on indemnity commission and this must not be scrapped because it would hit advisers badly.
Informed Choice managing director Nick Bamford says if indemnity commission is scrapped, it would kill off a big number of IFAs.
He says: “There is quite a large percentage of IFAs – I have heard 60-65 per cent – who are reliant on indemnity and if it was scrapped, they would probably fall down and never get up again.”
But Bamford says it is not true that clients will refuse to pay fees and says IFAs who say this have a “dinosaur attitude” and are less prepared for change than other adviser businesses.
CBK principal Peter Chadborn says: “I do not agree that IFAs will die out if we do not scrap indemnity commission. There is always going to be a need for advice but those IFAs that survive will be the ones who add value and a service in the eyes of the regulator and the consumer.”
Hargreaves says: “IFAs are not going to bite the hand that feeds them but I believe that it is the hand offering them indemnity which will strangle them. Is everyone blind and unable to see the vision that is slowly unfurling in our industry?”