FSA bans commission

whiteflag_3

GDB2222 wrote: »

I can see why you are an IFA. You make these generalised statements without any justification. /QUOTE]

Isnt that a bit of a generalist statement about IFAs?

and with what justification!!!;):D

dunstonh

GDB2222 wrote: »

I can see why you are an IFA. You make these generalised statements without any justification. Please explain why there will be increases in charges in some areas? Which areas, and why?

The thread already covers where increases are likely to be seen. At the lower value end of the market.

Now you provide your justification why it wont be?

GDB2222

whiteflag wrote: »

GDB2222 wrote: »

I can see why you are an IFA. You make these generalised statements without any justification. /QUOTE]

Isnt that a bit of a generalist statement about IFAs?

and with what justification!!!;):D

Well, he said: "Not likely to be that much in it. The only difference is that the retailer will set the charges that cover their remuneration instead of the product provider.

"If you are hoping for a big drop in charges then its unlikely to happen. There will be some decreases in some areas but there will also be increases in others."

Those are two general statements, and there is nothing in his posting to back them up. :D

GDB2222

dunstonh wrote: »

The thread already covers where increases are likely to be seen. At the lower value end of the market.

Now you provide your justification why it wont be?

If you look at my post higher up, you'll see I am saying I expect cost savings for the providers at around 1%pa. That would apply particularly at the lower end, because of reduced servicing costs. It's easy enough to see where that comes from in terms of not paying trail and initial commissions, plus savings on broker consultants, etc. It may not be exactly 1% pa, but it seems the right ball-park.

I also expect lower-end consumers to get generic advice at little cost, as it simply won't be cost-effective to provide any other sort of advice.So, it seems that they will benefit from the cost savings all round, really, but lose the (forgive me for being a bit cynical) somewhat doubtful benefit of individually tailored advice.

However, re-reading your original post, where you said "If you are hoping for a big drop in charges then its unlikely to happen. There will be some decreases in some areas but there will also be increases in others." I took that to mean charges from the provider. Maybe you meant the aggregate of charges from the Providers and fees from the IFAs, combined?

dunstonh

However, re-reading your original post, where you said "If you are hoping for a big drop in charges then its unlikely to happen. There will be some decreases in some areas but there will also be increases in others." I took that to mean charges from the provider. Maybe you meant the aggregate of charges from the Providers and fees from the IFAs, combined?

It was the aggregate that I was referring to you. The wholesale market will of course become cheaper as there will be no cost of advice factored in. Its the retailer adding in their charge where the unknown is and that can be higher or lower. I suspect on "average" value transactions there wont be a lot of difference to now. Large transactions will certainly benefit. Small worse off (as we have already covered on the thread).

There is also going to be some discussion on what wholesale prices actually mean. Economies of scale exists with retail financial services products just as it does in most retail areas. Will the wholesale price being offered be the same to all retailers or will the providers have different pricing tiers?

If you look at my post higher up, you'll see I am saying I expect cost savings for the providers at around 1%pa. That would apply particularly at the lower end, because of reduced servicing costs. It's easy enough to see where that comes from in terms of not paying trail and initial commissions, plus savings on broker consultants, etc. It may not be exactly 1% pa, but it seems the right ball-park.

The commission system of payment will still exist. For the majority of people, you wont see a move to paying by cheque. You will agree the fee with the adviser and then the adviser will factor that fee into the product either as an initial charge or phased charge or a higher annual management charge (than wholesale). So, the providers will still be using the payment system that is already in place. It will take a long time to get the UK consumer used to paying by cheque for their advice. The perception by many consumers that advice is free requires education. You still get tied agents telling their potential clients that IFAs charge for advice but they give it free. Until the consumer understands that advice is costed into the product, you wont see the cheque option become popular. That said, phased charging over a period is a pretty good option. As already mentioned, products already exist that allow you to set your fee and pay it from the contract. With pensions in particular, that means you get tax relief on the fee making it cheaper than writing a cheque.

whiteflag_3

dunstonh wrote: »

With pensions in particular, that means you get tax relief on the fee making it cheaper than writing a cheque.

the RDR will mean that this will not be possible post 2012. It does not allow for "fees" to make one product more attractive over another.

whiteflag_3

GDB2222 wrote: »

whiteflag wrote: »

Well, he said: "Not likely to be that much in it. The only difference is that the retailer will set the charges that cover their remuneration instead of the product provider.

"If you are hoping for a big drop in charges then its unlikely to happen. There will be some decreases in some areas but there will also be increases in others."

Those are two general statements, and there is nothing in his posting to back them up.

the wink and the big grin might have given you a clue the comments were said with tongue firmly in cheek.

GDB2222

whiteflag wrote: »

GDB2222 wrote: »

the wink and the big grin might have given you a clue the comments were said with tongue firmly in cheek.

I've added those into my post to make it clear I had tongue in cheek too.

dunstonh

the RDR will mean that this will not be possible post 2012. It does not allow for "fees" to make one product more attractive over another.

Fees will be able to be collected via the product. The fees will be the same regardless and the fee will still get tax relief regardless of provider.

whiteflag_3

dunstonh wrote: »

Fees will be able to be collected via the product. The fees will be the same regardless and the fee will still get tax relief regardless of provider.

well its how I interpret this-

"Adviser recommendations should not be influenced by the existence of terms or facilities offered, by product providers to collect adviser charges. The FSA accepts that it can be benefical for a consumer to choose to pay their adviser out of their investment (for example, because tax relief may be available) but the convenience to an adviser firm of receiving either up-front or recurring adviser charges through this mechanism should not influence the recommendation made. There will be no requirement on product provders to facilitate adviser charge payments through the product"