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Sesame chief calms fears of commission crisis

Gale reassures IFAs that change will be gradual as providers come under pressure from analysts

IFAs are not facing a commission crisis despite product providers coming under pressure from analysts to justify new business figures and up-front commission levels, claims Sesame chief executive Patrick Gale.

He believes that providers will reform commission amid concerns about persistency levels but says it will be a gradual change rather than a sudden shock.

Gale says: “The debate for providers is that they have analysts being advised by Ned Cazalet that new business volumes are not what they should be focusing on. The real thing is the design of commission shapes because it seems that persistency is not as long as providers wish.

“There is a lot of hot air about this but I do not think IFAs face a commission crisis. But as a directional trend, they need to be less reliant on up-front commission.”

Gale says he has been encouraging advisers to move from a dependence on up-front commission to recurring income and fees for the past three years but take-up has been slow across the industry, largely because most consumers do not want to pay up front for advice.

He says: “Scientific research shows the end client prefers to pay the up-front element through commission. Some advisers say they are going to be fee-only but nine times out of 10 they offer fees offset by commission. There are only a few who are totally fee only.”

Gale adds that he will not help fund advisers in making the transition from commission to fees. He says: “I do not want to fund their transitions. That is not our job.”


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