Commission, post-RDR was banned. But where has all the money gone? If we sacrificed commission pre-RDR, the client would have benefited as a result.
After all, where did the commission come from in the first place? Out of the client’s pot, of course, taken in charges. So if we had not taken commission, there would be more left in the pot to provide client benefits.
I challenged Friend’s Life recently regarding a maturing pension plan. Under pre-RDR rules, we would have received about £925 from the company for arranging an annuity. So, I asked if they could tell me where the £925 has gone. They initially replied in writing and said: “Commission is normally paid through charges deducted from the client’s investment, so if we do not pay commission, we will enhance the client’s investment where appropriate.”
Not convinced, I asked Friends to confirm the “precise amount that our client’s benefits were enhanced” by in lieu of the commission. Friends then changed their position and told me that “the commission due on retirement has no influence on the benefits payable and, as such, the effect of RDR does not enhance the benefits payable to our client”.
There have been pros and cons of RDR, and some unintended consequences. This must be the largest consequence, which appears, as far as I am aware, not to have been discussed widely.
Barry Johnson
Senior partner
Barry Johnson Financial Services
Northampton
