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Tuesday 30th of June 2009

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June 27, 2009

FSA proposes commission ban for IFAs

by Gill Montia

Story link: FSA proposes commission ban for IFAs

The Financial Services Authority (FSA) could ban commission payments to Independent Financial Advisers (IFAs).

In its recently published Consultation Paper on the Retail Distribution Review, the regulator favours the idea of clients seeking pension and investment advice being charged a fee, although not necessarily up-front.

IFA’s argue that this could stop consumers getting the advice they need and the FSA has conceded that the changes could result in one in five advisers ceasing to be independent.

However, the regulator believes that “commission bias” needs to be removed and the blow to consumers can be softened by fees being spread over the lifetime of an investment.

The proposals are scheduled for introduction at the end of 2012, after which financial advisers could become either “independent” and fee charging or “restricted”; that is to say paid to sell the products of a specific bank or insurance company.

The cost to the financial services industry is estimated at £430 million, plus an annual £40 million in compliance costs.

According to a report in The Telegraph, around 50% of the UK’s 35,000 IFAs currently survive on commission.

 

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