The Financial Services Consumer Panel is considering the LIA's proposal that commission should be scrapped to help consumers regain confidence in the industry.
The LIA's submission to the FSA's consultation paper CP04/3 asks if it would be possible to move the entire advisory sector to a new fee-charging basis as it believes this would remove any suspicions that advisers are biased by commission.
Speaking to Money Marketing, chairwoman Ann Foster says she sees commission as a barrier to making the market work efficiently and praises the LIA and Bestinvest, which rec-ently published a guide to the investment market calling for the end of up-front commission.
She says commission has often been implicated in misselling, playing a big part in the endowment rev-iew and points to pension misselling which was linked to commission.
Foster believes any change of this magnitude would have to come from the ind-ustry but recognises that advisers have to get paid somehow.
She also believes the FSA could go further on misleading ads and points to the Advertising Standards Authority which issues a monthly publication giving an outline of complaints against firms.
She does not expect the FSA to go this far but says she would like to see firms with misleading financial promotions given a much higher profile by the FSA.
The FSA says it plans to review its policy on publicity for cases in exceptional circumstances. The FSCP first raised these concerns last year, writing to the FSA to let it know it thought publicising judgements on ads would be a valuable tool.
Foster says: “Incentivising advisers by volume is not the best way of going about things – a better way might be to incentivise advisers through low levels of complaints. I am glad the industry is looking into commission as this sort of change would have to come from them.
“We also feel the FSA could go further in its dealings with misleading advertising. I do not think it can go as far as the ASA but I would like to see it giving a higher profile to its judgements on ads.”