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Severn says life offices will break ranks when sales fall

Aifa says the ABI’s proposals to abolish indemnity commission are “nonsense” and would be near unenforceable among its members, particularly when their sales levels start to drop.

In round two of the war of words between the trade bodies, Aifa director gen-eral David Severn says one of the ABI members would break ranks when its sales dropped and reintroduce indemnity commission, creating the bias which the ABI-commissioned research did not find.

Severn warns that axing indemnity commission would drive many smaller advisers out of business and he is calling on the Office of Fair Trading to scrap the idea as anti-competitive.

ABI head of regulation and strategy Francis McGee says the ABI is ignoring evidence of limited product and provider bias and there is a deeply held public conviction that commission undermines the quality and independence of advice.

Severn says: “If a client writes a cheque to his IFA for work done up front in the relationship, nobody gets excited but the moment commission enters the picture, accusations, now shown to be unsubstantiated, fly about bias.”

McGee says: “This is conspiracy theory gone mad. How would a provider’s interests be served by a cashflow squeeze on key distributors that would mean they might not survive?”

Richard Jacobs Pensions & Trustee Services director Richard Jacobs says: “I believe in the conspiracy theory and you can bet that providers will still pay indemnity commission to their tied agents.”Commission Edges, p38

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