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One book which was obligatory reading for financial advisers in the 1970s was Frank Bettger’s How I Raised Myself from Failure to Success in Selling Life Assurance. Apart from the snappy title, the book made a lasting impression with me in that Bettger stated that when declining to follow your advice, people will always proffer the most plausible reason first. He suggested that you should deal with this by asking: “OK, now what was the real reason?” As someone who has used this line for 30 years, I can attest to its effectiveness.

When I read the ABI document on proposed commission reform, I had much the same feeling that we had been proffered a reasonable argument but the reality lay elsewhere.

IFAs have long been an enigma for many on the provider side. First we had the demise of the maximum commission agreement and the introduction of the tied agent. That did not work so providers lobbied and we had depolarisation. Then there was panic when providers realised there would be a period before they could do without IFAs. So apply the brakes and bring on the menu.

Aifa reacted with understandable fury. After all, it should have had a pre-release copy of the ABI document and the chance to comment before its release. Given the support Aifa has given to Raising Standards, it is the least the ABI could have done. I, for one, am happy to embrace change but too much change and it is hard to tell which bit worked, if any.

The ABI document relies on statistics that are out of date and out of context. Had I submitted this as my O-level statistics paper, I would never have passed. This paper in some ways seeks to justify commission, then attacks indemnity terms. Is this just a way to push us into multi-ties, where indemnity reappears in a different format round the back? This may seem like speculation but, before you decry this theory, read the report one more time. The document adds nothing to the debate as it simply follows the lead of Sofa and now the Personal Finance Society in supporting transparency in advice costs. This report implies that insurance companies will automatically survive as the market evolves but this is patent nonsense. What will survive is quality business models, either bespoke or bulk distribution.

My favourite drummer Buddy Rich once said: “It is not what you leave in but what you leave out that makes you swing.” Before the ABI comments on commission again, it needs to recognise the variation in business models and where, if anywhere, it leaves its members.

This report saw major providers fail to support its key conclusions. Perhaps what the report has done is to prompt debate not just on commission but on the role of the ABI.

Just as Aifa was borne out of Nfifa, perhaps a more enlightened organisation will emerge from the ABI.

Robert Reid is director of Syndaxi Financial Planning


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