At a recent roundtable hosted by IA which focused on the international platform market, representatives from the life and platform industry discussed commission and it was suggested that it has, in some cases, allowed a short-term culture to prevail.
IA asked readers whether this was true and whether there was a case for banning commission as is about to happen in the UK and is possibly on the cards in Singapore.
The majority of readers said it should not be banned (see table), although almost half of all respondents said it does need to be controlled.
Sean Kelleher, chief executive of Dubai based advisory firm Mondial and IA intermediary panellist, said it is not commission per se which is the problem.
“It’s not "commission" that is the enemy, or the drug,” said Kelleher. “It’s the scale of the up-front payments. A high scale for making a sale means that a very good sales person (which may or may not be a good financial adviser) could receive income based on selling a 25 year savings plan with an implicit 25 year servicing contract, all up-front.”
However, Kelleher does make a distinction and says the structure for financial advice needs to be flexible enough to ensure “the worker gets paid for the up-front work and on-going service without all of it being charged up-front”.
“The "cocaine-users" are almost certainly sales-only orientated,” added Kelleher. “It would be small wonder that they would find change difficult. They would be living in a land where they get paid as much as the average brain surgeon even though their value-add is not much greater than the average pick-pocket. I would agree with the 46% – a gradual but realistic change.”
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