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What does the client want, Mr Sandler?

I am always amazed how inquiries are always chaired by someone who has a very big vested interest in one part of the industry or, better still, knows absolutely nothing about the industry whatsoever.

I was always astounded that Mr Weinberg was asked to report on the savings industry when he was only interested in hard-sell direct sales, especially in one of his own hard-sell companies.

More recently, Mr Myners was asked to report again on the savings industry.

I have no argument about the ability of either Mr Weinberg or Mr Myners. They have both run many successful organisations. The problem is that neither one of them even knows what a broker looks like, far less has ever visited a broker&#39s offices and I suspect that neither one of them has even heard of any of the brokerages in this land.

It therefore comes as a matter of complete amazement that the next person appointed is of absolutely the same ilk as the two previous ones, albeit with a much less illustrious career behind him.

Now it might just be that Mr Sandler has visited a broker – but certainly not in the last 20 years.

I am annoyed that these guys do not understand brokerages and they could write all they know about brokerages on the back of the perforation of a postage stamp and they know even less about clients. In all these reviews the client has not been consulted at all. While I am sure that all three of these illustrious gentlemen could at least talk for six seconds on brokerages, all three of them have never met a client in their lives.

They need to ask certain questions of clients such as:

Do you want to pay fees?

Will you pay a fee every time you go to your financial adviser based on the time he spends?

Are you happy with the present commission arrangements?

Do you understand the difference between fees and commission?

You see there is absolutely no problem with the way stockbrokers charge commission, it is clearly quoted on the contract note and very simple to understand. One of the problems in the whole industry is life companies. You know those organisations that Weinberg and Sandler have worked for are still wriggling and causing utter confusion.

Does anybody understand the charges and commission of a with-profits bond?

First of all, you get a different level of allocation depending upon how much you invest.

Then you can have a different level of commission if you take fund-based commission, you can have a greater level of commission if you do not. Then you can add the discount that you can offer to the client and add it to the extra allocation, which sounds as though you have actually got 142 per cent invested – in other words, a £10,000 investment would yield £14,200 the following day.

Oh, we forgot to tell you there are huge withdrawal penalties, particularly if you bought from the non-commission, hard-sell Equitable Life.

Not only that but the life companies are also playing commission leapfrog. This week, Thistle & Grampian Life will be offering 6.42 per cent commission.

Next week, Citadel in Suffolk Group will be offering 6.62 per cent and then Confuse Grab Them and Stuff Them Life will manage 7 per cent.

We are supposed to be in a world of full disclosure. If 99.999 per cent of all the brokers in the land do not understand life companies&#39 charges, commission and allocation rates, then what chance has the private investor?

The whole of the Financial Services Act disclosure rules were brought in because life companies refused to divulge the charges on their with-profits products.

Today, they are still not divulging the charges on their with-profits products in an easily understandable way and that is why Messrs Sandler, Myners and Weinberg are still being asked to carry out these stupid reviews.

The FSA should sit down with the life companies and tell them categorically that they have to have a system of charging and divulging commission that is understandable by that terribly well known, most important person in the whole industry – the client.

They ought to tell them then that unless they have it by December 1 none of them will be allowed to sell any products at all. It would be amazing how quickly they would come to a conclusion. Commission and charges have to be as simple as the stockbroker&#39s contract note, then Mr Sandier can fold his report and we will be in a world where everyone knows what is going on.

Peter Hargreaves is managing director of Hargreaves Lansdown

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