The FSA lacks experience and is failing to appreciate the similarities between IFA commissions and employee benefit consultant fees, advisers have warned.
With just weeks until the FSA reports back on responses to the retail distribution review consultation, the watchdog came under fire for its controversial plans to outlaw commission in the corporate market.
During a debate at the Corporate Adviser DC Summit, Andy Cheseldine, consultant at Hewitt Associates said: “The FSA thinks [commission and fees] are two very different things but they couldn’t see they are exactly the same thing; it’s just a way of taking money out of the pot. The FSA is populated with individuals who are very bright but who don’t have the experience.”
The FSA faced further criticism from advisers, who said the regulator was “tinkering with something that wasn’t broken”, arguing that the abolition of commission would put an end to paid financial advice in the corporate market.
Duncan Singer, corporate solutions director at Aegon Scottish Equitable, said: “The SME sector used commission to pay for their advice to workplace pension schemes. That has been cut off and they need to be convinced to write the cheque themselves or a huge part of the current market will end up going down the personal accounts route.”
Singer’s comments were born out by Malcolm Swatton, international senior vice president of HR at Universal Music, who agreed that pensions were seen as a less effective recruitment and retention tool than other employee benefits.
“There is not a desire to push the benefits of the pension scheme because every member that joins represents an additional cost to the employer,” Swatton said.
However, figures from the CBI pay and pensions survey found 82 per cent of CEOs saw providing a pension as their responsibility, although Jim Bligh, CBI senior policy adviser, conceded: “Larger companies see [pensions] as a moral obligation, while smaller employers are a different kettle of fish.”
In spite of advisers’ concerns Nick Burns, managing director of Blufin, claimed advisers added significant value to workplace schemes, and employers would be prepared to pay. “We shouldn’t underestimate the quality of service that we provide. Employers will pay, although maybe not quite as much and we’ll have to cut our cloth accordingly,” Burns said.