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Panel ponders LIA call to scrap commission

The Financial Services Consumer Panel is considering the LIA&#39s proposal that commission should be scrapped to help consumers regain confidence in the industry.

The LIA&#39s submission to the FSA&#39s 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.”


Newcastle launches 10-year fix

Newcastle Building Society has launched a 10-year fixed rate mortgage at 5.99 per cent, with an annual penalty-free option to redeem. The long term fixed rate aims to provide borrowers with security against potential rate rises while giving the option to move should circumstances change. Customers can redeem for free in December 2005 and then […]

Isis Asset Management – Isis Property Trust 2

Type: Closed-ended investment company Aim: Income and growth by investing in UK office, retail and industrial properties Minimum investment: Subject to negotiation with stockbroker Investment split: 43% retail, 34% industrial, 23% offices Place of registration: Guernsey Yield: 6.75% Charges: Annual 0.85% Commission: Subject to negotiation Tel: 0845 850 1515

The yield shield

In the UK there is a general tendency to knock anything that is good, be it in sport, popular music, fashion or business. This rule has also applied to the buy-to-let sector. This market has grown at a great rate of knots over the last few years but it is constantly knocked. We are always […]

Occupational hazards

Terence O&#39Halloran&#39s hard-hitting letter in Money Marketing requires a robust response. I fully agree with him that the misselling of occupational final-salary schemes was worse than endowments or split-capital trusts. With the latter, investors may have been told that the products were low-risk but with employer pensions, the members were told that the schemes were […]

Flexible reversionary trusts and estate planning

The suitability of different estate planning solutions will depend on the individual’s own circumstances, needs and objectives. When considering the different solutions available there is a trade-off between inheritance tax (IHT) efficiency and access. Overall a flexible reversionary trust provides a greater level of flexibility than a discounted gift trust and can offer individuals a […]


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