View more on these topics

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.”

Recommended

97% of investors accept FDL deal

Fund Distribution Limited says over 97 per cent of investors have accepted its first distribution offer and 113m has been paid out to around 24,600 investors. This covers losses totalling 284m and represents a recovery of 40 per cent of losses. FDL will make its second and final distribution of 29.5m, equivalent to 10p in […]

Collective thinking

Following publication of the article in Money Marketing, headlined, OFT tells regulator to get menu sums right, I am writing to clarify the situation about market averages on the menu. Following the complaint from Aifa to the OFT last year, we agreed with the OFT that we would examine the market average figure for collective […]

Morgan Stanley – FTSE Simple Growth Plan 10

Type: Capital-protected bondAim: Growth linked to the performance of the FTSE 100 indexMinimum-maximum investment: 5,000-no maximum, Isa 4,000-7,000Term: Six yearsReturn: 125% of the growth in the index at the end of the termGuarantee: Original capital returned in full regardless of the performance of the indexClosing date: August 25, 2006, August 11, 2006 for Pep/Isa transfersCommission: […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment