Ron Sandler has stunned IFAs and providers by suggesting that IFA clients are only satisfied because they think advice is free when it is really an opaque loan paid for through commission.
Speaking at last week's annual Aifa dinner in London, Sandler, head of the Treasury-commissioned review into the long-term savings industry, said: “If it is made to appear that a service is being offered for free, then a high level of satisfaction is almost inevitable.”
Demonstrating that IFAs still have a lot of convincing to do, Sandler described commission as “the provider in effect making an opaque loan to the consumer which is paid back over time”.
In the first public indication of the direction that the review will take, Sandler also criticised the industry for ten-ding to “use the word advice too loosely” and said that it was over-simplistic to say IFA reward should not be compromised purely because IFAs encourage more saving.
He added that IFA remuneration cannot be looked at in isolation from “possible reform of polarisation” but ruled out a commission cap.
Fuelling concerns that his review could push IFAs out of parts of the market, Sand-ler said: “Our supervisory regime could simplify products which would be bought with a lot more confidence than at present with a correspondent reduction in the need for certain elements of advice.”
Norwich Union sales director Peter Hales says: “I am concerned he seems to believe the current commission system seems free and have raised the issue with him. Any wholesale withdrawal would disrupt distribution.”
Holden Meehan director Amanda Davidson says: “We are still at base camp. Sandler is using aggressive terminology – commission is not opaque but is disclosed.”
Aifa director general Paul Smee says: “Sandler's position on commission has not moved on from his consultation document. The overall message is very challenging. There is still a lot of work to do.”
Sandler speech, p2;