Unlike some of my colleagues in personal finance journalism, for whom the term itself ranks as one of the filthiest in the English language, I have always had a slightly ambivalent view about advisers being paid commission for the work they do.
Maybe it is because I have spent almost 25 years covering the financial services industry and have known enough advisers personally to know they would never be influenced in their recommendations by what they might earn from them.
My first IFA, shortly after I started at Money Marketing in the early 1990s, was like that. He was chaotic and disorganised at times, but I do not believe for a nanosecond he was remotely biased in his advice to me by the product commission amounts he might earn.
Perhaps it is also the fact that I, too, have worked on commission. During the mid-1970s, while in my late teens, I took a job as a guide in Italy, escorting groups of holidaymakers, mostly Americans, as they travelled around the country with me and a driver as escorts.
Many of these tourists were of Italian descent, returning to visit the “old country” their parents or grandparents had emigrated from one or two generations earlier.
Our basic pay was awful, barely £6 plus food and bed for a day that started at 8am and could continue until midnight, when the last traveller went to bed and we could then do the same.
What made the work attractive financially were the tips at the end of the trip – plus the commission, up to 20 per cent on sales of all sorts of items, from jewellery to books, leather goods and even furniture our tourists bought at the various shops we stopped at during the day.
The amount we earned in commission was worth anything up to 10 times what we were paid by our employer. And some of the stuff our holidaymakers were buying was, frankly, expensive tourist tat.
From my personal perspective, there was no “bias”: no matter what the customer bought, I still got my 20 per cent. If he left the shop and went elsewhere he would pay much the same for his table: every local business had its small team of commission-hungry tourist guides paying them a visit with punters in tow, so prices were surprisingly stable – and high.
Despite my ambivalence on the subject, which I have expressed more than once in Money Marketing, I have strong reservations about the prospect of a return to some form of sales commission for advisers, as expressed recently by FCA interim chief Tracey McDermott in an interview with fellow columnist Paul Lewis.
It has to be said I am not remotely surprised by this move. I argued months ago the Financial Advice Market Review was a creature of the banks and big insurers who have lobbied for it in order to boost sales at the expense of consumer interests.
And so it has come to pass.
The problem, it seems to me, is that commission is so outdated and 20th Century. Once upon a time it might have been the dominant form of remuneration across the industry, with clients mostly failing to understand the advice they were receiving was not “free” but was being paid for via their premiums.
But today all that has changed and advisers have, in the overwhelming majority, moved on. Since the RDR there is greater awareness of how commission works and most consumers, given a choice in a way they could understand, would opt for fees if they are given the chance.
Moreover, though some advisers might hate to admit it, the move to a predominantly fee-based form of payment for their services has been good for them too.
In the past two or three years many have taken significant steps forward in terms of being able to persuade their existing clients about fee-based services.
Sure, we have not yet reached the stage where, for most, what is being sold is advice and not the product. Yet there is some recognition that this is the direction of travel for advisers. It may be five years down the line but it is certainly on the horizon.
By contrast, returning to commission-based remuneration is not just the lazy way out of doing business, it is also a retrograde step.
Ironically, the only sections of the industry really desperate to see commission making a comeback are not advisers, who are adjusting to the new environment.
It is banks looking to rebuild a market for their services by using less-qualified salespeople to punt basic products to their large customer bases, the equivalent of shooting fish in a barrel.
If they get what they want from the FAMR they will re-infect an industry that has, even if unwillingly and without great enthusiasm, taken important steps to clean itself up, and those who benefit from the move will not be advisers, even if some are rubbing their hands at the prospect.
While the majority of advisers will be unaffected in terms of how they work, a return to commission will reinforce a climate where mistrust is the dominant feeling consumers have about the industry.
Are a few commission cheques for a tiny minority not employed directly by banks or insurers really worth it?
Nic Cicutti can be contacted at firstname.lastname@example.org