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Why the FSA won’t hold fire on RDR

There are just a few fairly significant problems with trying to persuade the FSA to hold fire on the RDR:1: The FSA appears to be entirely unaffected by the economic downturn for the simple reason that its income is entirely unrelated to what is happening in the real world of commerce. How nice if the rest of us could raise what we want simply by compulsory levies.2: The FSA has no idea just how much up-front work an IFA has to do to get a new client on board. We could charge fees but so much damage has been done to the reputation of the industry that hardly anyone is prepared to pay for what they perceive to be nothing more than being steered in the direction of whatever product best suits the pocket of the IFA.3: The FSA has a proven and documented history of only very limited preparedness to take note of representations from the industry.


On the question of factoring, if the FSA could be persuaded to take on board that an overnight banning of indemnity commission or any other variant would constitute and unmanageably brutal transition, then one solution might be a phased transition over a number of years.

For example, in the first year of transition, advisers could be allowed to get two-thirds of the commission on indemnity, with the balance on non-indemnity. In the second year, the maximum allowable on indemnity could be reduced to one third and only by year three would the full amount in respect of any new policies have to be paid wholly on non-indemnity terms. Most people, I think, would find it hard to mount a strong argument against the proposition that, to improve and to stabilise, the industry has to move on from merely selling product for up-front commission. This is one way in which this might be achieved without half of all intermediary firms going to the wall in the process.

Julian Stevens

Harvest IFM, Bristol

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