In today’s RDR paper, the FSA said it will not introduce adviser charging into protection but will require firms to disclose any commission payment where pure protection is sold at the same time as investment advice.
Axxis Financial Planning director Owen Wintersgill says: “It is good to know that the regulator and all parties concerned are finally realising some financial services products, such as protection, are absolutely sold not bought.
“Removing commission would quite simply decimate the amount of protection contracts that people are taking out. It would be completely counter-productive and nobody would pay a fee for advice on protection.”
P3 Wealth Management managing director Frank O’Donnell says today’s decision makes sense. He adds: “If you had to pay a fee for protection advice then the chances are the consumer will not take a policy out so for that reason, it makes a lot of sense.”
Lifesearch senior policy adviser Matt Morris says he is not surprised that commission remains, adding it was the only sensible decision if the FSA was to avoid “killing off protection advice”.
He says: “On this occasion the FSA have got it spot-on. Not only is commission not detrimental in protection sales, it is an essential tool that benefits the consumer and helps the adviser.”
Friends Provident chief executive Trevor Matthews says the FSA’s main conclusion not to apply adviser charging for pure protection products is the “right choice”.
He says: “I fully endorse the FSA’s decision not to apply adviser charging on pure protection products.”
Bright Grey and Scottish Provident proposition director Roger Edwards says: “This is the response we were hoping for and it is definitely the right response. The danger was that banning commission in the protection space would lead to reduced sales because people would not pay a fee to be told to buy a cheap term assurance.
“I think the majority of advisers will welcome this news.”
However, Calculis director Alex Pegley has concerns with today’s RDR paper. He says: “It counters the whole concept of moving to a customer agreed remuneration world. If we’re going to do this, then lets go all fees.
“It is further watering down and the FSA has obviously been nobbled by some persons. They should just scrap commission.”