Ernst & Young is warning there could be a fire sale of highcommission products as providers seek to cash in before the RDR is implemented.
In an assessment of the impact of the RDR, head of insurance services Shaun Crawford predicts greedy providers will try to boost last-minute sales using up-front commission.
Crawford says providers will fall into three categories – the grateful, the grounded and the greedy.
He says: “Before provider commission is removed altogether, the greedy course of action would be simply to throw money at securing as much commission-based business as fast as possible before the opportunity is removed.”
He says the grateful are those which are already well placed for business such as annuities, protection, self-invested personal pensions and Isas.
The grounded will be under threat, with less risk-based business and less tied distribution. He says they must work to establish distribution ties and acquire links with platforms.
Crawford predicts that factory-gate pricing will lead to more provider league tables emerging as consumers shop around on price. But he adds: “For more complex advice-led sales, like Sipps and group annuities, fees will continue to have an important role and league tables will play a reduced role.”
He adds: “Consumers faced with a flashy advertisement on a tube station platform may decide to go direct to the fund management company. In this scenario, there is a third price, whereby the consumer uses neither an adviser in the sales process nor a fund supermarket but simply buys direct off the page.”
Crawford says all face-to-face advice could end up commission-free. He says: “The regulator cannot ban commission, it can only commission the ban. Smaller firms with less financial clout, fewer qualifications and a reliance on old commission models will have to move into the bancassurance and tied sector or fall by the wayside.”