One in three advisers back FCA commission U-turn

More than a third of advisers would support the return of commission as a revenue source in the advice market, research suggests.

A poll of 429 advisers conducted by CoreData Research found that 34 per cent would welcome the return of commission.

A further 13 per cent said they were uncertain, while 53 per cent would not like to see commission come back.

Similarly, 53 per cent of advisers said they would change their fee structure to include commission if allowed.

Almost half of respondents believed the fact the return of commission in some form was under consideration shows the FCA has failed in its RDR objectives.

Quizzed on what kinds of products would be most suitable for a commission element, the most popular option was pensions, chosen by 34 per cent of advisers, followed by Oeics and Isas, nominated by 24 per cent and 23 per cent, respectively.

Some 15 per cent of advisers responded that all pensions and investments products should be able to charge commission.

The findings come after Money Marketing revealed an expert panel would consider recommending a return for commission as part of the Financial Advice Market Review.

The FAMR, jointly led by the Treasury and the FCA, is assessing barriers to the provision of financial advice, particularly with a view to tackling the advice gap for people with smaller pots to invest.

As part of that process, the Government appointed an independent panel to develop reform proposals, and Money Marketing revealed in January the panel was discussing the development of a new charging structure similar to commission on simple accumulation products.

Some 34 per cent of those surveyed by CoreData said commission would help advisers re-engage with mass-market investors.

CoreData head of international Craig Phillips says: “The biggest unintended consequence of the RDR initiative was to extend the advice gap, which resulted in many professional advisers seeing no merit in offering their services to mass market investors.

“The potential return of commission has clearly split the advice market, with a considerable number of advisers willing to take advantage of this opportunity while recognising the risks which commission payments bring with them.”

The survey also found 49 per cent of advisers felt the potential re-introduction of commission was being considered as part of a bid to bring banks and building societies back into the advice market.

Similarly, 70 per cent said banks would be the biggest benefactors if commission was re introduced to the market, while 51 per cent said such a reform would provide mass-market advisers with the biggest boon.

However, advisers were less optimistic on their own prospects, with just 32 per cent saying the impact on their sector would be positive.

Phillips says: “Although many advisers who have struggled to adapt in a post-RDR world consider this change to be a potential lifeline to their business, there is a clear feeling the banks will be the big winners if this comes to fruition.”

Adviser views

Dennis Hall, managing director, Yellowtail Financial Planning

It’s not surprising the market is so divided. There are people who have always been anti-commission and were heading that way long before the regulator got involved.

There are others what would like fees but are struggling with legacy issues, and those dealing in lots of protection and struggling to consider fees for other work.

That means a blanket approach saying you can’t do this or that is never going to gain acceptance.

Matthew Harris, director, Dalbeath Financial Planning

What you have here is a situation where IFAs secretly would probably quite like commission back. Many probably feel a bit nostalgic for it, but they know in their heads that commission was basically to blame for most of the misselling scandals of the past.

It’s like a greed versus virtue situation, and some might even be afraid of what they may be tempted to recommend to clients themselves.