Regulation  

IFA: RDR commission ban has not removed churn risk

The potential for adviser bias still remains despite the commission ban brought in by the Retail Distribution Review, an adviser has claimed.

In an interview with FTAdviser to be published later today, Colin Lawson, senior managing partner at Cheshire-based IFA Equilibrium Asset Management, said that although the commission ban eliminated most product bias, the ability for advisers to earn fees for switching clients’ money between products means the potential for bias still remains.

Mr Lawson said: “I have got a very strong belief that the RDR was originally intended to eliminate commission bias... what they should have done is eliminate bias across the board.

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“You should not be able to charge fees for switching funds. You should instead be able to charge for managing funds. We can still [earn thousands of pounds] to make a switch. To press a button.”

“I think they have left bias on the table.”

In October 2011, Intelliflo chief executive Nick Eatock claimed data tracking adviser recommendations do not support the theory of commission bias. According to Mr Eatock, advisers did not show an overall tendency towards recommending products with higher commission.

Martin Wheatley, chief executive of the Financial Conduct Authority, said in a speech earlier this year (8 August) that charging a percentage of product investment does not eliminate dealing bias because advisers would only get paid if people buy a product.

In its inducements paper published in September the FCA said it will look for potential rather than actual conflicts of interest brought about through inducements from providers.

The full interview with Mr Lawson will be published later today.