The Government and the FCA are being urged to allow providers to pay commission at a standard rate with no clawbacks as part of a radical advice overhaul.
FCA acting chief executive Tracey McDermott has admitted the Financial Advice Market Review may reintroduce some form of commission.
This came after Money Marketing revealed the FAMR panel was considering radical reforms in a bid to boost access to advice, including lower qualifications and a return to commission.
In a subsequent interview with BBC Radio 4’s Money Box programme McDermott said the regulator had received 290 responses to its FAMR consultation and would be examining those over the next month.
Asked whether it was true that a return to commission was on the table, McDermott said: “We do not want to go back to a world where we have the problems of pre-RDR. What we do want to look at is what is the best way of delivering advice and guidance across the market. So I wouldn’t rule out that there may be some element of commission, but we are not going to reverse the RDR.”
Old Mutual Wealth chief distribution officer Richard Freeman, who is a member of the FAMR panel, says the reintroduction of commission may be necessary to encourage people with small amounts of money to invest to pay for regulated advice.
He says: “Intrinsic are proposing an extra tier of advice where you would need qualifications and supervision, but at a lower level. It would be done on mandated products that are kite marked, with standardised fees across the industry.
“We are advocating that should be limited to basic Isas and a basic pension. On the commission point, the problem with the RDR is you can no longer cross-subsidise.
“But if you say the standard fee is £300, we are saying that should be covered by the product provider and that cost could be spread over 12 months.
“It would be very clear and the client would understand upfront that would be taken out of their investment. We are not talking about a return to the bad old days here. There would be no clawbacks and once the client decides they want to pay, the product provider takes the risk of them not paying for a longer period.”