Commission Ban Would Be Draconian - Response to Aegon Research Report (Press Release 27-02-07)

FP Advance, the leaders in transition planning, today urged regulators to promote a lighter tough framework and ‘weed out the sharks’, in order to promote higher standards and greater value in the adviser sector. FP Advance Chief Executive, Brett Davidson, added: “A complete ban on commission would be draconian and potentially damaging”.

According to the Aegon IFA Insights Survey, released yesterday, more than 80% of advisers support the idea of a common level of commission to avoid perceptions of provider bias. Additionally the survey revealed 88% would be dissatisfied with a total ban on commission as a means of remuneration, while 95% believe commission has a vital role to play because clients are unwilling to pay a fee for advice.

Brett Davidson, Chief Executive of FP Advance, comments:

“It is refreshing, but I have to say not surprising to see these results from IFAs. We work extensively across the IFA market and are finding that the vast majority of IFAs are looking for ways to move to a recurring income model. The major sticking point is ‘how’ to achieve this move with pressures on up-front cash flows. However as our clients have seen, you don’t need to re-mortgage your house and sell your children to make the transition, you simply need a considered transition plan.”

Like the majority of IFA respondents in the survey, FP Advance do not favour a ban on commission; but instead point out that the real issue is not whether clients pay by fee or commission but is more about transparency and value:

1. Transparency: The client is the only person that ever pays for advice regardless of how that payment is collected; a fact that the FSA would do well to publicise in its financial capability work over the next 12 months
2. Value:Advisers must be clear about what clients will receive for the costs of advice and be better at explaining where they really add value (picking funds is not the only area of value added)

Weed Out The Sharks

Helping IFAs build a more effective business model would seem to be the number one priority in the industry at present. The Government and the FSA need good advice to exist in the marketplace and IFAs are the best way for this to eventuate, but there is work to be done. Once the regulatory framework is established to weed out the sharks the next wave should be focused on accentuating the positives that already exist in the advice market and developing business and educational skills within the IFA community.

Lighter Touch Regulation

Recognition of financial strength and TCF compliance should lead to a lighter touch regulatory and Professional Indemnity regime for those advisers that meet the benchmark.

Davidson adds, “Let’s dangle some carrots for the industry leaders as well as providing sticks for the industry laggards.”

ENDS

For further information, please contact

Brett Davidson, Chief Executive, FP Advance

0207 431 3663

enquiries@fpadvance.com

Nicola Mitchell / Kim North, Mitchell Moneypenny

0870 241 5982 / 07976 359093

enquiries@fpadvance.com

Notes to editors

About FP Advance

FP Advance provides a range of services to corporate clients to allow them to increase the productivity and professionalism of their mid to high level distribution including speaking services, training and consultancy. The also offer consultancy services to practitioners with the aim to help advisers;

    * Move from up-front commissions to a renewal income stream
    * Focus on client service strategies as the lever for growth
    * Understand the power of systems
    * Grow the bottom line via increased productivity
    * Increase the sale value of their businesses
    * Create leverage from compliance rather than a burden
    * Communicate the value they add to clients
    * Design a workable succession plan
    * Attract & retain quality staff
    * Build a bespoke business system
    * Increase profits
    * Enjoy their working lives again

About Brett Davidson

Brett Davidson is Chief Executive of FP Advance, a specialist business-strategy consultancy and ‘leaders in transition planning’.

Brett has worked closely with the Institute of Financial Planning (IFP) helping its member firms and has been in great demand as a presenter and consultant all over the UK. As an Australian Certified Financial Planner, Brett was instrumental in developing service strategies to meet the needs of high net worth clients.

Brett holds a Bachelor of Arts from the University of New South Wales and a Diploma of Financial Planning from Deakin University.