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Reality check

Reality TV shows have never been my thing, especially as they seem to last far longer than necessary. The current run of Big Brother has evicted several housemates, only to invite viewers to elect them back in. This has caused a furore and money made on this has been diverted to a charitable cause.

Indecisiveness is a major flaw in the English character and is seen in all trade bodies, quangos and civil service departments in the UK.

We now hear that the Association of British Insurers has taken the reform or removal of indemnity commission and popped it in the shredder.

Just as we thought churning was to be restricted to the dairy industry, it now seems that it is safe and can continue.

I suppose I should have guessed when Norwich Union introduced its new product, which has the benefit of indemnity commission, that the ABI would defer any move away from indemnity.

Now, before I go further, if a commercial body takes the risk of paying me excessively without the client suffering, then I see no commercial reason to decline popping a large slice into the call account as we go. But if the whole payment is treated as earned, then we have two gullible parties and not just one.

In moving to fees, we need the FSA to start to see the difference between a wrap and a product. The wrap lends itself to fee-based business only. In fact, commission does not sit easy with the wrap concept.

At the moment, the FSA is indicating that in using one wrap, you are no longer independent, so we could have a highly professional firm charging fees direct or via the wrap but being seen as less professional than those which sell products rather than advice but can still claim to be IFAs.

This makes little sense and in reality means that the independent title is already tainted and of little worth while it is possible to place bias on the commission option over the fee-based option.

If we want to serve the client and not the provider, then it needs to be the client who pays us, either direct or via the wrapper.

As long as the provider dictates the cost of advice, we cannot move forward, nor can we afford to serve as broad a market segment as seek our quality of advice. Bring back CP121?

When the ABI decided to look at the abolition of commission per se, I wondered if it was not in fact looking for the reason not to do it as opposed to the reasons to bring it to a close.

Ned Cazalet’s report should have been the final element of research that helped it justify its stance in removing or at least reducing commission. Instead, we see the whole matter parked and unlikely to be reopened until the first of the providers on its working party goes to the wall.

As we find information takes a minimum of a month to obtain, we have to consider charging all new clients a significant deposit. Instead of debating commission, could the ABI not have looked at service which continues to decline?

But this is not a strategy that will ensure its survival. The harder the ABI makes it to review investments, the easier it makes the decision for us to move the assets elsewhere.

Back to reality. The search for the next Maria has got my interest.

Let us hope Andrew Lloyd Webber is better at searching for a solution than the ABI or perhaps it should be renamed as the Association of British Indecisiveness? Well, it would be if it was not so unsure.


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