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Commission for financial advisers won't make a comeback

Sue Lewis, member of panel reviewing the provision of financial advice, insists a return to commission payments is not on the agenda.

 
Commission for financial advisers won't make a comeback

Sue Lewis, a member of the expert panel assisting the government in its review of financial advice, has rejected the idea that commission payments to financial advisers could be revived three years after they were scrapped. 

She said comments by Tracey McDermott, acting chief executive of the Financial Conduct Authority (FCA), the City regulator, that the regulator would not rule out a return for ‘some element of commission’ had been taken out of context.

McDermott's comments to the BBC last month were widely taken to mean the FCA was considering reversing elements of the retail distribution review which in 2013 banned banks, insurers, fund managers and other financial providers from paying commission to advisers who recommended their products.

It is thought by some that a limited U-turn could be justified if it helped solve the savings gap which critics claim has worsened as independent financial advisers have gone up market to focus on wealthy clients who can afford the fees they must now charge.

However, Lewis, who also chairs the Financial Services Consumer Panel, said McDermott did not mean commission was definitely back on the agenda. ‘I don’t think Tracey really meant to imply it's back on the table,’ she said.

‘It’s been taken out of context. It invites commission bias. Why would we want to go back to that world again? I’m not convinced it’s something the industry or the regulator wants.’

Lewis (pictured), who serves on the 16-member panel in a personal capacity, said she would definitely advise against a return to commission because of the potential for an increase in bias in recommendations.

‘We are dead against commission coming back, and are thinking there’s a case for it to be banned for non-advised sales,’ she said.

Lewis could not comment on the exact discussions taking place due to confidentiality agreements, but said the panel was not being influenced by providers and banks who sat on it.  

The panel is led by Scottish Widows chairman Nick Prettejohn and includes Aviva UK life chief executive Andy Briggs and Hargreaves Lansdown chief executive Ian Gorham, as well as bank bosses including Barclays chief executive for retail and business banking Ashok Vaswani. Financial advisers Robin Keyte and Gill Cardy also sit on the panel.

‘I personally would have liked more consumer focused people on there but there have been good discussions,' Lewis said. ‘People are on the expert panel as individuals, they’re not meant to be bringing their firms or baggage with them.’

Lewis also said the review would not immediately lead to regulatory change, as the Treasury was likely to consult on any changes proposed by the panel before introducing new rules.

'It’s all about feeding back to the Treasury. I imagine what they will do is consult on the basis of more concrete proposals rather than something very green, they’ll say we are thinking about doing X,Y and Z,’ she said.

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