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‘Lone ranger’ adviser days look over

I recommend that people read the FCA’s thematic review of sales incentive schemes – it is not very long. 

In general, the review is positive about the progress being made, especially at the big banks. It also gives plenty of examples of good practice (whereas earlier documents concentrated on the bad stuff). 

The regulator is not against all incentives, just those that lead to misselling. Having got the banks moving in the right direction, it is now focusing on smaller firms.

The FCA makes two points about our sector:

1) Many networks need to deal with inappropriate incentives at their ARs. This will not be popular with the ARs affected but it is the network that is regulated and responsible for this stuff, not the ARs. If ARs do not like it, they need to become directly regulated.

2) Many small firms think 100 per cent variable pay (as in you-eat-what-you-kill) is not an incentive scheme. The FCA report reminds everyone that it has issues with this method of remuneration. What has been missed out in the comments above is that this applies to employed and self-employed advisers. However, most employed advisers are not on 100 per cent variable pay whereas many self-employed advisers are. 

There are a number of factors at work which put the self-employed adviser business model under threat. This is just another one. It is a bit like the football Premier League – most of the money goes straight to the players and the clubs have little control over wages. But in our world this is changing and the “clubs” are taking more control (or being forced to by the FCA). 

It will be interesting to see how this pans out. I believe the days of the “lone ranger” adviser, operating loosely under the banner of another firm, are numbered. If that affects you then I am sorry – but forewarned is forearmed.

Tim Page 

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