PFS proposes solution in FAMR commission debate

Published on

The Personal Finance Society has suggested a solution to the debate over commission and the Financial Advice Market Review (FAMR).

The body says an answer is already available via a client agreed advice fee (CAAF).

According to chief executive, Keith Richards, a solution compliant with post RDR conduct of business rules could include the option for advice fees to be recovered over an agreed period of time from the client’s regular premiums – the same facilitated fee option that is popular for investments.

“As a professional body we would not be in favour of a return to commission of old for investment and savings,” he said, “and this view is clearly shared by many across the advice sector. There is little adviser demand for a return to commission and it would have no appeal for most providers, given how capital intense and uneconomical it was.

“The advice profession has evolved significantly post-RDR and continues to gain positive recognition for the key role it plays. Despite the positive engagement by the government to seek solutions that will increase access to advice, especially for hard working people who want to do well for themselves, it is important we continue to move forward.

“However, the FCA and the Treasury are open to exploring options to recover a transparent advice fee from regular premiums, in particular for consumers who want to save but may be put off seeking advice because of up-front fees,” he continued.

“Three years after RDR abolished the factoring of commission into investment and savings products, transparent client agreed adviser fees can be facilitated via the provider or platform as a client option – so the potential to recover from a regular premium over an agreed period of time seems more down to who would want to offer this service.

“In order to best serve the interests of a wider segment of consumers, FAMR could result in the introduction of a simplified ‘CAAF’ option. It would certainly increase the options available for the public to pay for advice, reduce barriers to engagement and be capable of working equally well for full advice.

“More importantly, it can be implemented immediately, as there’s no conflict with RDR COB rules and it wouldn’t be commission as some suggested.

“Vertically integrated firms are already well-placed to operate such a system in a post-RDR environment, as recovery is easier to administer,” he concluded, “but as the idea would improve consumer options and access, it should be opened-up to all models.”

COMMENT ON MORTGAGE SOUP

We want to hear from you!
Leave a comment and get the conversation started.
You need to register to post, so please login or sign up below.

Latest articles

Catalyst Property Finance acquired by Foundation’s sister company

Specialist lender Catalyst Property Finance has been acquired by The FHL Group, the sister...

Housing crisis deepens as supply falls and affordability worsens

The UK housing crisis is worsening, with affordability pressures mounting and housing supply stalling,...

Clydesdale Bank eases criteria for self-employed mortgage applicants

Clydesdale Bank is set to introduce a series of changes to its mortgage criteria...

Newcastle trims large loan mortgage rates

Newcastle for Intermediaries has announced rate reductions of up to 0.30% across its large...

Mortgage advisers must evolve to meet rising demand for later life lending, warns Key

Mortgage advisers must adapt their business models to address the growing needs of older...

Latest opinions

What is the Protection Claims Charter – and how does it work?

The moment of truth for any insurance product is at point of claim. Insurers have...

Affordability reforms, housing ambition and the uncomfortable PRS truth

Let’s be clear: the FCA’s recent Discussion Paper (DP25/2) isn’t necessarily about buy-to-let lending....

Broker proactivity can ease path back to prime

One of the lessons we’ve taken from the ever rising levels of interest in...

We need to look again at two-year swaps…

Over the last 12 months, we’ve seen three notable things happen in the swaps...

Other news

Catalyst Property Finance acquired by Foundation’s sister company

Specialist lender Catalyst Property Finance has been acquired by The FHL Group, the sister...

Housing crisis deepens as supply falls and affordability worsens

The UK housing crisis is worsening, with affordability pressures mounting and housing supply stalling,...

Clydesdale Bank eases criteria for self-employed mortgage applicants

Clydesdale Bank is set to introduce a series of changes to its mortgage criteria...