The advice industry remains “addicted” to commission and must make radical changes to seize the opportunity presented by the Government’s radical pension reforms, says financial journalist Paul Lewis.
Speaking at at the annual Personal Finance Society conference in Birmingham today, BBC Moneybox presenter Lewis said despite the RDR the “spirit of commission” lives on in products such as equity release and through adviser charging.
He said: “Although commission is banned, the industry is so addicted to it, it sneaks in in the back door like a smoker who sneaks out for an e-cigarette.”
Lewis said the “risk reward agenda” is a myth designed to attract clients towards more profitable products, as is active management.
He said: “It is only when those vestiges of commission are cleared will the advice profession be trusted again.”
Lewis said advisers will need to advise on all areas, including care fees and debt management, and offer their services to consumers regardless of the size of their pension pot, in order to take advantage of the pension freedoms coming into force next April.
He told delegates: “The traditional areas of pensions and investments will not be enough for advisers wanting to advise on the pension freedoms.
“Advisers will need to know how it impacts means-tested benefits, and give advice on inheritance tax and care home fees. Many advisers will have to broaden their knowledge.
“Scrap risk appetite and fund selection and learn what the effective interest rate is on £40,000 worth of premium bonds. I also urge you to consider charging structures – these people will not need ongoing advice, and advisers should move to a simpler fee structure such as an hourly rate.”
He added: “Advisers should be willing to show someone with £10,000 the basics in as friendly a way as a client with £1m, in the same way a plumber would still help with a basic problem.
“Some of it will be less profitable and some of it will be more profitable, but you are an adviser, you should do everything.”