Commission impossible: RDR ban must not single out advisers

Jon Cudby

Laughably, I have heard estate agents cited. Used-car salesmen will earn commission too, but I don’t think either job is characterised by the sort of professional standards advisers aspire to.

More pertinent are the incentives offered by banks to sales staff. Those clients who will not visit a financial adviser post-RDR will quite feasibly migrate towards banks for their ‘advice’.

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A recent Which? survey put the implications of that migration into a stark light – 46 per cent of bank staff said they knew colleagues who had mis-sold products just to meet their targets; 37 per cent said they were uncomfortable with the level of pressure placed on them to push a specific product; and only 6 per cent of those who had been encouraged to sell more believed it to be in the customers’ best interests.

These sales targets are surely commission by another name, and appear to be having an impact every bit as detrimental to the consumer as the worst accusations levelled against adviser commission. Sure enough, the FSA has announced vague plans to clamp down, but it has only asked banks to ‘rein in’ their bonuses, not abolish them entirely. The regulator is also allowing “12 to 18 months” from its September announcement for the banks to get their houses in order.

I can see how regulators have concluded that commission-based sales are a fundamentally bad thing, and I genuinely believe their abolition represents significant progress towards the adviser sector becoming a profession rather than an industry. But if the RDR’s biggest impact is to push more people towards a different form of incentivised product sales, advisers will be right to feel victimised.