IFAs are revealed to be up to four times cheaper than services offered by their direct-selling rivals in the FSA's menu proposals.
Despite a fierce rearguard action fought by the banks and other direct operations, the FSA has decided to apply the menu to them as well as IFAs rather than opting for the proposal set out by the banks.
According to figures submitted to the FSA 18 months ago by a steering group comprising trade bodies and product providers as part of the original menu proposal, commission paid to IFAs can be up to four times less than the commission equivalence earned by direct salespeople.
One product provider admitted to the group that, on a stakeholder personal pension paying in a regular premium of £300 a month, it would pay initial commission of £300 to an IFA compared with £1,168 to its tied agent.
Another said under the same circumstances, it would pay an IFA £805 initially but pay a direct salesperson £2,340 up front.
The menu will mean that all advisers will have to tell consumers at the beginning of the advice process how much it will cost them, and those remunerated by commission will have to compare their rates with the market average.
Direct-selling operations will have to do the same and only they will have to reveal commission equivalence, which is defined as anything that providers would be prevented from giving to IFAs under the indirect benefit rules.
However, there are fears that the FSA may tilt the balance back in favour of tied operations when it carries out a review of the methodology of commission equivalence later in the year.
Aifa director general Paul Smee says: “The menu gives IFAs the means to show how competitive they are, it is up to them to compete.”
Informed Choice managing director Nick Bamford says: “If consumers have not realised before that independent financial advice is best, they are going to realise pretty damn sharpish with this.”