The FSA’s practitioner panel has attacked the underlying assumption behind the retail distribution review that commission leads to bias, suggesting there is no reliable evidence that this is the case.
Speaking at the FSA’s ann-ual public meeting in London last week, practitioner panel chairman Roy Leighton said the debate about the future of the industry should not start from the point that all commission is bad.
Leighton suggested that the FSA’s consumer panel is wrong to call for a ban on current rem-uneration structures, saying such a move could go against the interests of the consumer.
He said the concept of customer-agreed remuneration has its merits but much more thought needs to be given as to how it will work in practice and the information that should be disclosed to clients.
Leighton said experience proves that clients do not want to pay fees and that consumers should be given a fair choice between commission and disclosed fees.
He said: “It seems to be universally taken for granted that commission-based remuneration leads to commission bias. However, the panel has not seen any proper and reliable evidence of this. We believe the issue is not really about commission per se but about raising professional standards within the retail industry.”
Financial Services Consumer Panel chairman John Howard told the RDR’s three-way split for the financial advice market could leave less affluent consumers more vulnerable to poor advice.
He said the new system risked confusing consumers and allowing a general financial adviser category to carry on relying on commission-based remuneration did not go far enough.
Howard said: “Far from being a threat, we see customer agreed remuneration as having the potential to save independent financial advice. It is a neat solution to the inadequacies of commission. Our view is that it need not change the income of advisers but it will change their relationship with the consumer.”