'Will killing commission kill financial advice?' blog discussion

Bogle

Its ok to say that most people will go online to get advice, but quite often when you buy online you are doing so an execution only basis. The amount of regulation that exsists would mean it would be impossible to give proper advice over the internet.

And you only have to read these boards to know that the DIY option is not suitable for most people as they don't always realise what they are buying.

It should be the clients choice whether they pay for advice via fee or via commission or a combination of the two.

People need to realise that the commission option is not FREE and better education and more transparent products would solve this issue.

from 2012 if you cannot afford or won't pay a fee the adviser can take his fee directly from the product, however this all has to be done upfront. The FSA will be banning factoring.

Allowing factoring would mean you spread the cost of the advice over a period say 5 years and pay a slightly increased product charge during this period.

This is what people need to be lobbying for and I would urge everyone to write to their MP.

If the proposals go through in the present format proper independent advice will be out of reach for the average working man and the retired

*MF*

*MF* wrote: »

Any and all regulations promulgated by the FSA are subject to the continuing scrutiny of the Office of Fair Trading (OFT).

An extract from the OFT website reads:

- Our job is to make sure that consumers have as much choice as possible across all the different sectors of the marketplace.

- When consumers have choice they have genuine and enduring power.

The last major attempt to control commissions was ruled out by the OFT. Whatever the arguments for and against in this latest attempt by the FSA it is clear that:

- consumer choice is being limited

- that the impact goes beyond choice over commission or not

- namely it is all too easy to see that it will lead to an inevitable reduction in choice over how and who provides independent financial advice.

Are the OFT happy to see market restrictions and price controls? If they are, perhaps it is time they told us.

No apologies for repeating my own post ... and highlighting the question I posed over the inactivity of the OFT, and their responsibilities to ensure open markets and the curtailment of price controls.

Why?

Well, read on ...

Lord Turner, FSA Chief Executive ...

Speaking at the FSA’s financial capability conference in Cambridge last night ....

FSA says consumers may have too much choice

Turner also speculated on whether some products are too complex to be sold to consumers at all and if the FSA should intervene on pricing, at the expense of access to the market for some people.

Extracts from here:

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=190086&d=340&h=341&f=342&nl=MM_BN&dep=webops&dte=150709

Are you happy - as a consumer

- that the FSA will restrict your access to markets, and decide for you what prices you should pay?

- and that the OFT sit idly by whilst this occurs?

Compensationitis

Such a heated debate about nothing of importance!

Yes I agree that the FSA now thinks it can control markets and pricing, and yes I do agree that it smacks of communism gone mad but why is Turner (I don't recognise annointed people) being so belligerent? is he trying to protect his (or Gordon Brown's) empire or is he genuinely trying to protect 'consumers'? He certainly couldn't give a fig for consumers caught in the LAUTRO fiasco, or Equitable Life, or even the collapsed banking system, so why is he spouting all this anti-competitive rubbish? Only he, or his master will know. The rest of us can only vent our spleens on sites such as this.

chrisboote

Surely the simple solution to 'commission bias' is to enforce what my IFA does anyway

IFAs must reveal the commission they will receive from each solution they offer

My IFA has been doing this for at least ten years, and sometimes I pick the option that gives her the most, sometimes I don't, sometimes i don't pick any of her options

She is also honest enough to say that while XXX offers a better deal for me, she gets no commission from it, so would have to charge me £50 or £85 for her advice & time

Honesty like that can be enforced to make all IFAs as good as mine

koexelek

chrisboote wrote: »

Surely the simple solution to 'commission bias' is to enforce what my IFA does anyway

IFAs must reveal the commission they will receive from each solution they offer

My IFA has been doing this for at least ten years, and sometimes I pick the option that gives her the most, sometimes I don't, sometimes i don't pick any of her options

She is also honest enough to say that while XXX offers a better deal for me, she gets no commission from it, so would have to charge me £50 or £85 for her advice & time

Honesty like that can be enforced to make all IFAs as good as mine

You understand the true value of a good IFA though, Chris.

Most of the general public don't.

James_Trimby

I am not at IFA but know many and recommend some to clients of mine. Some are good some are not so good BUT almost without exception they provide a better service and better products than the direct sellers (especially Banks) They already have heaps of rules and disclosures to have to follow, and the knowledge they need to gain of thier clients before being able to advise is huge. A bank employee can just sell and insurance policy (and earn a bit more in their paypacket or further brownie point towards promotion) an IFA has stacks of paperwork to do for this.

For the wealther end of the market most IFA's I know are moving to charges and refunding commissions but at the lower end where the advice is most needed the problem is going to be large. THe cost savings on a policy will have to be large to justify using an IFA (most people will look a year ahead to recover costs even if product is a 20 year one) BUT one should also be looking at the quality of the product etc... How is this going to feature if costs become the be all of the service?

Is this really going to improve the market From the info I have Equitable Life didnt pay commissions and was a direct seller (BUT their staff were very well rewarded well above average rates for the industry) this change would seem to be supporting this type of business and look where that company went.