The LIA is calling on the FSA to consider a radical proposal which would move advice away from commission to a fee-charging structure.
In its response to the FSA's consultation paper CP04/3: Reforming Polarisation – A Menu For Being Open With Consumers, the LIA asks if the entire advisory sector could be moved to a new fee-charging basis as it believes this would remove any suspicions that advisers are biased by commission.
The LIA advocates drawing up a fee-charging template separately identifying the elements of advice – order taking, arranging and ongoing service. This could be used by all advisers to create a fee menu, giving consumers the choice to either pay the adviser's costs directly to the adviser or have them costed into the product.
The LIA believes that the decision on the menu has probably already been taken but points out that it is still possible for the FSA to stop and evaluate new alternatives, otherwise there is a risk of incurring a considerable new cost with little practical benefit.
Public affairs director John Ellis says: “The merit of this approach would be that, once and for all, we would be able to get away from the suspicion that commission incentivisation biases recommendations.”