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UK banks unlikely to pose threat on commission

While the news story headlined, Scandinavian shock as banks drive out IFAs, may ring a few alarm bells among a proportion of your readership, I think we need to consider the fact that the financial services arms of banks in this country are, by the sound of things, very different operations from their Scandinavian counterparts.

Most of what we know and read about the selling practices of the UK’s bancassurers and their IFA arms suggests that they are very much more orientated towards selling products than providing advice. Certainly, that has been my experience to date.

As most IFAs are well aware, fees are a much trickier proposition to justify when all they relate to is the sale of a product. I imagine that the vast majority of predominantly or exclusively fee-charging IFA practices will readily confirm this.

Given this scenario, I think the likelihood of the banks here pressing for the abolition of commission is remote. They simply could not compete with IFAs, who actually give advice.

Having said that, there are clearly powerful forces at work whose very determined agenda is to make sure that the cost of advice (or the sale of a product) is clearly quantified in the mind of the client and that that cost, whether in the form of commission or a fee, is fair and reasonable relative to the services provided.

I wholeheartedly support measures that will put an end to the established and well-known practice of bank or building society advisory arms taking, for example, commission of 6 per cent or more on investments, irrespective of how large the sum invested may be.

IFAs who bury their heads in the sand about the issue of fees are going to find themselves faced with the need for a very abrupt and possibly difficult change to their established business model when faced with a client with a mouth-wateringly large sum of money to invest who states bluntly that they are prepared only to pay a fee.

Cost-savvy clients are going to become increasingly common and we had better be ready for them.

Julian Stevens

WDS IFAs, Bristol


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