Maybe it’s because Christmas is approaching and one is prepared to view things more optimistically but I feel that perhaps we are seeing some light at the end of the tunnel of heavy regulation.
Clive Briault has at last recognised that there is no level playing field between commission and fees as commission does not carry VAT. Not only is a non-VAT situation preferable for the client, it is also preferable for the adviser who does not have to negotiate yet more bureaucratic hurdles.
We then have another breath of fresh air in so far as the National Consumer Council acknowledges that customers have to take some responsibility for their decisions. I wonder if the Financial Services Consumer Panel, Financial Ombudsman Service, Financial Service Compensation Scheme and Which? will begin to see the light. I might start believing in Father Christmas again.
Although it is possible that within the retail regulatory reviews we may see some progress with regard to how commission is viewed, it may well be jeopardised if we cannot understand what people like Peter Hargreaves are saying. If I read him correctly, he is not saying commission per se is wrong but that indemnity commission is wrong and who can argue with that fact? It seems obvious that it is disadvantageous for all concerned, except the life office.
Indemnity has been a mechanism by which the life office has been able to control the advisory channel. You do not have to be an actuary to understand that he who pays the piper calls the tune and, when they have a lien over the distribution channel, they have quite simply got you by the short and curlies.
If you are relying on regular-premium contracts, you must be seeing the wrong clients. In general, the better-off pay single premiums for pensions and investments. If you do not have sufficient renewal or fund-based commission, either you have not been in business very long or are doing the wrong things. If you are just starting a business or have not been in it very long and you need to rely on indemnity, it must follow that you started the business undercapitalised.
If you were making rubber widgets, you would not expect the rubber supplier to pay you the full invoiced price of 200 widgets up-front.
People with the experience of Mr Hargreaves should not be dismissed in such a cavalier manner. His experience and success perhaps have something to teach us all and maybe we should listen.
The trade bodies work indefatigably in our interests and are starting to get the message over but we must meet them half way. Indemnity for investment and pension products I would have thought is almost impossible to defend. Indemnity on products such as term insurance and annuities is perhaps more acceptable in certain circumstances.
With Christmas approaching, I am feeling more kindly disposed to the principle that with a little bit of goodwill on both sides, who knows what we can achieve?
Harry Katz Norwest Consultants, Stanmore, Middlesex
Norwest Consultants, Stanmore, Middlesex