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Taking issue with the offset argument

Both Robert Reid and David Elms are quoted as saying that if commission offset is banned, than less than 2 per cent of advisers will be able to call themselves independent. I would take issue with this.

If we assume that there are around 25,000 registered individual IFAs in the UK, then nearly 10 per cent of them are already being paid by their clients without the need for commission offset.

They are the 2,300 who use Transact. To these can be added those advisers who use other wrap services that work on the same principle, that is, where the adviser and client agree the form and amount of the adviser’s remun-eration and where the client instructs the wrap service to deduct those amounts from their cash held on the platform.

This can take the form of an hourly rate, a fixed, or an /ad valorem/ fee. For those advisers who still feel that asking the client to pay for advice is tantamount to comm-ercial suicide, we must redouble our efforts to convince them that this need not be so.

As I say, there is ample evidence supplied by those 2,300 advisers and their 52,000 clients who hold £4.35bn on Transact that the “pure” wrap service enables advisers not only to concentrate on providing advice but to be paid by the client for doing so.

But, alas for many, it will be a case of there are none so blind as those who will not see.

But all is not lost. Many of these advisers will concentrate on providing primary advice and will be paid commission by product providers.

The Finance Act 1986 got rid of many of the worst excesses that existed in financial services before that date but, sadly, it also signalled the dramatic decline of the direct salesforces.

Since then, the sale of life and pension policies to all but the more affluent has declined in equal proportion. Most professional financial planners will not be able to afford to operate in this market.

A return to the commission-paid salespeople who believe strongly in the need for individuals and families to be protected against premature death or prolonged retirement is to be welcomed.

Malcolm Murray
Head of marketing
London EC2


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