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Intrinsic pushes for standard commission rates and no clawbacks in advice overhaul

Richard_Freeman_Intrinsic

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.”

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. Compliance Thought 14th January 2016 at 1:13 pm

    Why will the providers suffer the clawback. Get all you friends to sign up, pay 1 months premium, cancel and the adviser gets to keep the money.

  2. Possible Provider deferral of any comm. payments until completion of a claw back period.

  3. Why do we need to return to commission, its not needed. Call it a fee, pay it out of the product over a 12 month period. Any return to commission will be a poor outcome for the consumer. A few other question, who is going to pay for the FSCS payments, will be get an option to opt out and who is going to pay to police it?

    We have all worked to hard to achieve and implemented what was DEMANDED of us by the regulator and RDR, just to see them reverse it, as what we told the regulator would happen, did. Why should the qualifications be lowered? McDonalds keeps ringing in my head for some reason, but now it suits the regulator its now a good idea. Billions have been spent to achieve and improve the financial services industry implement RDR, just as it is showing the benefits of removing commission, they want to bring it back, WHY?

    This is not the solution, it should not be called commission, it should be a spread fee, payable by the consumer, have no impact on the product provider other than the cost to implement. We already have this over 3 months, it just needs the term increased to 12 months. Any thing less than this is a total admission that RDR was a poor outcome, the advisers were right and that a commission cap would have achieved the same outcome with out the Billions wasted.

    I can see the life companies and banks supporting a return to commission, I wonder why! Just remind me which sectors have the greatest number of complaints!

  4. How does Richard Freeman become an CEO of a major Network when he does not have the first idea how product providers calculate premiums or have any compliance knowledge?

    He could move all his ARs onto a level commission basis but some might move to other Networks of course. His comment on clawback I can only describe as naive!

  5. Retrograde step

  6. “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.”
    They wouldn’t be paying for advice. They’d be in a position whereby the salesperson had to flog a product or not get paid, miss his bank sales target and get fired. Brave New World innit?

  7. Trevor Harrington 14th January 2016 at 11:12 pm

    some of the correspondents above would be better off living and working in a communist state. I am particularly surprised at you the business owners – you had your own business and presumably you employed people who worked for you because you paid them to do so, as well as the love of your own persona, of course (?) … and presumably, over the years, you “let some go” who did not perform to your financial model.

    If you want to disentangle the entire concept of work and reward, then I am afraid that is the only way that it can be done – go and try living in a communist state (I would recommend Korea), and you might also like to cast an eye around the rest of the World as well, just to see just how successful communism has been over the last 100 years or so. In fact, if you really look around, there are also some very good examples of socialist policies in our own Country that might bear your balanced and critical examination as well (not).

    Those of you who want to discuss your pompous elitist opinions about the superiority of fees versus commissions, verses salaries and bonuses, versus incentive schemes, versus self employed and employed and all the other garbage of self opinionated views of what you think is ethical, correct, incorrect and biased due to the influence of “money” … may I suggest that you clear off to one of the Communist Countries that you have found through the above instruction … and stay there.

    Financial reward is the only one that we have, and no matter how it is presented as a motivational force, the issue is how it is balanced with quality control, management, care and diligence, and above all else, a clear motivation for the long term client relationship and client benefit, where the client’s best interests are paramount to both the company and the salesman … which incidentally … we all are … salesmen.

    Management is the key my friends ….. not this vacuous discussion about how money (commission?) is used to motivate people … that is just currency and geography.

  8. A distributor trying to dictate how advisers should be remunerated and at what level. Who would have thought?

    No thank you Mr Freeman.

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