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Treasury raises concerns over Mifid commission ban

The Treasury has voiced concerns over the Mifid II proposal to restrict a ban on commission to independent advisers, saying it could distort the advice market.

A draft of Mifid II, which was revealed by Money Marketing last month, suggested that restricted advisers may be allowed to receive commission under the directive.

Speaking today at the Association of Private Client Investment Managers and Stockborkers annual conference, Treasury financial secretary Mark Hoban said: “We remain concerned with the details to restrict a commission ban to independent advisers.

“We believe it could distort the market if you allow advisers to continue to receive inducements from third parties for simply dropping the label independent.”

Hoban went on to add the Treasury would “continue to fight” to make sure Britain continued to be at the forefront of changes in European financial services.


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There are 22 comments at the moment, we would love to hear your opinion too.

  1. Don’t see any problem. IFAs really should be highly qualified ( level 6 minimum) and be paid on a proper fee basis – none of this CAR nonsense.

    Everyone else should be allowed to continue to sell on a commission basis.

    The public would then choose which way to go.

    Ah – now I understand – You don’t like choice and simply want to force your views on others.

  2. Would it make for an interesting way for future FSCS funding to follow?

    Fee chargers -v- commission payers/earners.

    Might well reveal

    – whether commission, does act as an inducement, does create bias and thereby potential consumer detriment

    – whether the RDR and the obligatory higher qualifications and presumed professionalism does lead to greatly reduced consumer complaints.

  3. Totally agree with Cassandra. What is wrong with giving clients the choice to either pay fees by going to an IFA or, by receiving restricted advice and having commission deducted from any subsequent investment.
    If only we lived in a truly democratic society!

  4. Agree Cassandra, presumed professionalism. Higher level qualification WIL NOT make for higher professionalism. In America you are highly regarded for being a successful salesman/woman as long as you act with integrity and honesty which 99% of IFA’s already do!

  5. John Blackmore makes a good point. We all know that there are insufficient HNW clients for true fee based advice.

    Once the public realise that IFA = £200ph they will accept restricted advice as a good value alternative.

    We don’t take commission in our firm, working more on the CAR principle, but strongly believe that it should be an option for those that wants it.

    If MIFID II goes through I see a return to the pre-1986 landscape of everyone pretty much doing what they want to.

    Everything is circular and the £10bn plus spent on regulation over the past 20 years has been totally wasted.

  6. “….. simply dropping the label independent.”

    So, the only difference he sees between an IFA and a Restricted Adviser is the label?

  7. Kevin – after 2013 it pretty much will be the label. If I read the FSA requirements correctly no-one is going to be able to meet the independence requirements at a price that even a true HNW client is prepared to accept.

    We will all be restricted.

    I think we need to come up with a better name.

  8. It`s going to be like instructing everybody in the Country to only shop at Harrods, stupid!

  9. so many ifa’s seem put out by rdr… why?

    – because they wont be able to churn clients money around every 3 years for a big pay out

    – because they cant be bothered or cant pass the exams..


  10. Hi Mrtothepoint.

    If you had an IFA that did churned your money every three years would you use him/her again? No I thought not. Neither would I. In fact, I don’t know anyone that would.

    This is not an easy way of making a living and the vast majority of those now doing so exist because of the goodwill they have earned within their businesses.

    I think your comment is rather boring, tired and outdated.

    IFA’s don’t like RDR because it potentially robs them of their businesses and imposes a charging regime that is a regulatory wet-dream rather than a device of the market.

    It is also costing around £2bn with no guarantees or relevant research to indicate that it will improve outcomes for consumers. In fact the very opposite is likely to be true for the majority.

    Thanks for contributing but do try to make a valid well thought out point rather than just regurgitating some old guff you read in the Daily Mail ten years ago. Kindest regards.

  11. sorry mr smug, my mistake i meant churning peoples money every 2 years..

    never read the mail, just had 15 years in the industry and seen too many bad apples.

    What businesses will rdr be robbing people of? trail commissions that are not deserved. i suggest you start planning for 2013 a little better than wasting your time on internet forums..

    good luck and happy churning ( for the next 14 months anyway )

  12. Hello mrtothepoint.

    You clearly have a big chip on your shoulder that no-one on here will dislodge. I’d probably feel like that if I had failed after 15 years in business.

  13. re – mr smug

    its amazing how much time you ifa’s seem to have in between all the research you do..

    it says everthing about yourself and a lot about your industry that you would choose to call yourself mr smug – but what would i know, im just a failure..

    just off to count mr £96k redundancy pay off before i start my new job in december, maybe i should change my name now to mrsmug2..

  14. Mr Smug, I think you are right, poor old mrtothepoint was probably one of those that went skint because they never got to grips with making an honest living from this business.
    More like a plank on the shoulder than a chip.

  15. Roger Chadbourne 11th October 2011 at 4:10 pm

    re: argument above.
    I think both of you (and a lot of others) are missing the point.
    RDR is not bad because it requires qualifications to be formalised to give people like myself a licence to do exactly what we have been doing for the last 25 years, not because it arbitrarily destroys most IFAs business model, not because it proscribes the way in which advice and recommendation MUST be given even if wrong, but because IT DENIES THE SERVICES OF GOOD INDEPENDENT ADVISERS TO THE MAJORITY OF THE POPULATION THAT NEED US.
    Example – elderly widow has saved £1000 for new grandson’s 18th birthday. How should she invest it?
    1 hour fact-find, discussion, ATR, AML evidence, 2 hours research & report writing (it still has to be done), 1 hour presentation of ISA recommendation and suggested codicil to Will if she doesn’t survive 18 years, application, document check and delivery. Commission – £30.
    Same week, client retires with several EPPs, PPs, AVCs, etc. Same time spent as above, plus negotiation with ceding companies. Recommendation – Drawdown. Commission – £15K
    Value to both clients – the same.
    BUT because of case B, I can offer my services to case A. Everybody happy.
    Post RDR – sorry, little-old-lady, I cannot afford to deal with you unless you pay me at least £150 per hour (£800 min). Try the Bank – and God help you!
    Forget churning – it will still happen, forget the “cowboys” – they will still be among us, forget the “not-quite-the-best-advice” – it will still happen.
    But please, don’t forget the middle-to-lower income bracket that NEED our services but won’t get it because they, and we, will not be able to afford it.

  16. What the consumer needs is access to financial advice that can be trusted at a price that can be afforded – whether commission, CAR or pure fee.

    At the moment as a direct consequence of the FSA’s current proposals the consumer has the worst of all possible worlds. In particular no realistic access to advice on regular contribution savings and the adviser charge counting as 5% of bond income.

    These are real issues that need real solutions as the Eu seems to have recognised under MIFID. But as ever the logic totally bi-passes the FSA.

    A return to a revised version of the maximum commission agreement would solve these problems and cost us all (and the public) far less. Those advisers that want to can still work on a fee only basis and sell that as their USP thus allowing the consumer to decide.

    As ever here too many financial advisers jockeying to score points and position their particular business model for perceived commercial advantage.

  17. Yes I know: should have been “counting “towards 5% pa” bond income

  18. Roger please expand on your point.

    3% commission or CAR on £1,000 is still £30 before and after RDR. I do not see what has changed?

    On a related matter and to me improbably the FSA have said on the record that post RDR they see no issue with poorer clients being cross subsidised by richer ones…

  19. While commission exists there is no such thing as a “fee based IFA”. When commission is abolished there will be no such thing as an IFA…

  20. God give me strength. This is the same M Hoban who supports the RDR?

    I have been fee charging since oooo 1992 ish. At the same time I have manipulated the commission system when it best served clients.

    A lot of you commenters need to start thinking it through. Whether a client pays you by way of a fee of by way of commission – assuming the quantum is the same – is entirely neutral cost to the client. It can even produce a saving to the client if the discount rate used by the manger is generous and if it means the client can effectively get tax relief on your fees – when you arrange a pension say.

    The whole fees / commissions debate is being distorted by those seeking advantage and those in the quangos who have an issue with ‘commission’ per se.

    Be very clear – to paraphrase Noel Coward in the Italian Job – “Markie, everyone in the world is on commission’.

  21. Ken Durkin…well put.
    After 26 years and fully qualified I will be hanging up my IFA hat and will just do mortgages, GI, Life & PMI then introduce any investment business……life is to short, the cost onerous and the risks to great to remain as a small IFA post 2013.

  22. Well said Simon Webster | 11 Oct 2011 4:12 pm

    I wonder is Mr Hobans concers will be treated in the same way he treated some 80 MP’s when they stayed up late to debate RDR in the house of commons last year with Mr Hoban in the chair. Not one MP from all parties was happy with RDR yet Mr Hoban refused to answer their questions and at the end just read what appeared to be a pre prepared speach. That is democracy for you !!

    Personally I am more and more convinced that the majority of us have been badly served by regulation as we know it. From Maxwell, Equitable Life, FRS17 etc. etc. From pension fund and with profit endowment providers being forced to reduce risk and sell equities when they may not have wanted to do so etc. etc.

    It would be really good if we could have an independent analysis of regulation going back 20 years to see if we are reall all better off as a result.

    Can’t see if myself and RDR is not going to improve access to advice either.

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