Legal & General is set to slash IFA commission rates on endowments in the belief that the new regulatory regime means the end of high commission payments.
The life office says the drastic action could be extended across the full product range sending shockwaves through the IFA community. L&G was the first office to end payments of up front commission on pensions.
If the commission cutting venture proves successful in continuing to grow L&G's IFA business, the firm's fastest-growing distribution channel in 1999, industry analysts believe it could spark a host of other leading life offices to follow suit.
The life office has informed IFAs it is no longer offering with-profit endowments of less than 15 years and is proposing to cut the commission it pays IFAs for selling endowments by almost 10 per cent.
It believes commission structures across the industry are set to be put under the microscope by the FSA as part of the Government's crusade to stamp out “rip-off Britain”.
IFAs are being consulted on its proposals to cut commission rates for endowments and a decision on the final level of payment to be offered is expected in March.
Legal & General pr manager housing Peter Timberlake says: “IFAs are under pressure to offer value for money by concentrating on recommending good products. Regardless of the commission attached they should be able to convince more people to buy them.”
Brewin Dolphin director Andrew Longbon says: “If Legal & General can do it then many others could also do it.
“It will end up offering the consumer better value for money which has to be a good thing in restoring the reputation of the third most hated industry.”
Troy French and Partners Peter French says: “At the end of the day we have all got to earn a living and there must be a limit to how much fat can be trimmed. This could force the industry down the fees route which is not what the public wants.”