The advice community is presently undergoing great upheaval as the ‘Retail Distribution Review’ draws near. With it, will come the banning of ‘commissions’ for all investment-based financial arrangements from January 1st 2013. The move to fees may not actually be as much of a revolution as one might envisage, as it will still be permissible for providers to deduct an agreed ‘fee’ from arrangements for onward payment for advice.
However, much is being made of this ‘Brave New World’ and the FSA seems genuinely proud to have taken this bold step. Which makes it all the more curious that they seem not to be demanding it from the contractors with whom they do business themselves:
In a recent Freedom of Information request, the journal Professional Adviser discovered that the FSA had paid more than £6.69m in commissions to Recruitment Consultants and Head Hunters since 2007, with the most expensive year being 2010, during which £1.91m was spent in this manner.
Financial Advisers face a continued squeeze on the viability of their businesses as regulatory costs spiral and clients become ever more price conscious. Since the regulatory fees are ultimately borne by clients in what they pay advisers, it seems all the more incongruous that such a vast sum of money should be spent on their behalf.
If the extraneous costs of recruitment and selection look large to you, then consider the fact that the total estimated annual cost for the FSA’s conduct of all its operations now stands at £543.5m, of which £371.8m is earmarked for staff costs and recruitment.
For me to comment on these revelations would probably be ill advised, so I merely pass them on to you here so that you may draw your own conclusions…..