In its annual report, the FSCP believed that commission payments were creating a bias among brokers, which it believed had caused, and would lead to, more mis-selling.
Writing in the foreword to the report, chairman John Howard, said: “We believe commission has the effect of encouraging advisers to sell products to consumers that may not be the best or most suitable for them, but which boost the income of the adviser. I cannot see that a new system could be introduced piecemeal. It would require the whole industry to adopt it and it is likely that either the FSA or the Treasury will have to introduce rules to require all firms to move to a new system.”
With the FSA set to publish its views on remuneration in the Retail Distribution Review on 27 June, the issue of commission could be pushed to the top of the regulatory agenda.
However, neither lenders or brokers believed the mortgage industry was ready for an end to commission.
Linda Will, managing director of Accord Mortgages, said: “If brokers are not getting a proc fee, they will have to charge fees. But most people, especially those who aren’t cash rich, wouldn’t want to pay. The FSA is all about consumers getting advice and shopping around but people won’t seek advice if they have to pay for it. Plus, the average proc fee is only around £300 and brokers aren’t going to sell their granny for that kind of money.”
Jason Richardson, director of YooToo Financial Services, said: “I don’t mind if I work for fees or commission but I don’t believe consumers are ready for a 100 per cent fee-based system. It may work in investments and pensions but not in mortgages. I think consumers would rather have us get commission than pay a fee.”
