Cost and value. The two terms may be interchangeable for some, but when applied to advice they can have very different connotations. The prospect of a return to commission, as first reported in these pages earlier this month, has inevitably prompted a heated debate among advisers and the wider industry.
It begs the question: can we get to a place where switching up the charging models for advice makes it more accessible? And can this be achieved without damaging the value of advice, a concept that has been hard fought over the last three years?
The reason this has been brought to the fore, of course, is there is a concerted effort to try and plug the advice gap. The argument goes that by bringing back some form of commission, the banks, providers, and fund groups could push the reset button and go back to delivering mass market advice.
The saving grace of the new commission model is it looks different from the old commission structures in two key ways: it would be the same regardless of provider, and would only be applied to basic accumulation products.
Where I start to be wary is whether we really want to be bending over backwards to invite the banks back into advice.
The saying goes that “something is better than nothing”.
But the families of the elderly HSBC customers flogged unsuitable products to pay for long-term care, or the cautious investors told by Barclays to invest their savings in what turned out to be an adventurous Aviva income fund would beg to differ. There are no doubt countless other examples which underline that there was a lot wrong with the mechanics of commission in the past.
It is also unclear how the new-look commission model would interact with cross-selling other products. If other investments and pensions products are tacked on to the basic, commission-paying stuff, presumably this will be paid through an advice charge. How would this two-tier payment system then be disclosed?
But the commission issue is not black and white. No one wants to stand in the way of something, however unpalatable, that could be the turning point in delivering advice to more consumers. I am also alive to the reality that in some parts of the market, such as protection and mortgages, commission tends to work well.
Yet it is critical we get the model right.
There is a reason why tentative supporters of commission caveat their argument by stressing the need for appropriate safeguards.
Natalie Holt is editor of Money Marketing. Follow her on Twitter: @Natalie_Holt_MM