FSA to kill IFAs with commission ban?
Has the FSA watchdog become mad and rabid just before being put down?
That’s the question a lot of IFA’s will be asking after the announcement today that the FSA will ban commission sales from 2012.
After sleeping through the financial crisis, and often taking token action in the event of breaches, the FSA is suddenly announcing a rush of policies in order to justify its existence – and the cost to the tax payer to run it.
It’s an open secret that commissions can skew impartiality – but competition within the financial services sector means that the difference in commissions paid doesn’t necessarily vary an awful lot.
So if you ask an IFA about the best insurance policy for a particular need, the IFA would gain a decent commission regardless of the choice made. The need to push individual products over others is limited.
And more important for the consumer – the advice would be free for them, paid for by commission.
By killing the ability to receive commissions, the FSA will force IFA’s to charge for their services – but why on earth would anyone want to pay for advice if they feel they can gain most if not all of that advice online and via comparison websites?
Comparison websites, which of course are funded through affiliate commissions paid to them for each resulting sale.
What the FSA does not seem to realise is that information has become abundant, and free, with the promulgation of the internet.
No doubt IFA’s have already been adversely impacted on simple products such as insurance, but where IFA’s especially come into their own is the ability to provide professional advice on more complex products – mortgages, pensions, and investments, for example.
For that, the expectation would be that IFA’s provide a valuable consumer service. And one that remains free for consumers.
The FSA may be concerned about mis-selling of PPI insurance and self-certified mortgages, but I’m sorry FSA – that happened on your watch, and you did little about it at the time.
As usually seems to happen with the FSA.
Recent demands from the FSA, such as the banning of self-certified mortgages, are not reasonable – they are a lifeline for self-employed people, as I can speak of from experience.
Yet mis-selling of self-cert mortgages within banks was well reported in the media a few years ago – but I struggle to find any reference to action the FSA may have taken about that.
And now a direct attack on IFA income seems unwarranted, uninvited, and ultimately, anything but helpful for consumers.
Here’s an outstanding thought for the FSA – if you are tasked with regulating a market, then regulate it. Don’t just take the easy option and try and kill it to make your job easier.
Most IFA’s are self-employed people or SME’s who work hard to provide a useful and valuable service – just because the FSA can’t be bothered to make a proper effort at doing it’s job, does not mean that it should try and damage other people’s abilities to do there’s.
Especially when they are already working under the existing harsh and limiting regulatory rules that the FSA is supposed to ensure are enforced in the first place.