The end of free
It never was free, of course; we always paid. But in two years’ time, financial advisers will no longer be entitled to commission on the savings products they recommend to their clients. Not before time, either. Most of the disasters in the personal financial sector have been caused, directly or indirectly, by the practice of paying commission on sales. By far the most high-profile of these was the endowments mis-selling fiasco of the early 1990s; and the only reason defined-contribution pensions – in my view, just as egregiously mis-sold on commission – have not hit the headlines is that the alternative, defined-benefit schemes are just bust.
Commission indirectly resulted in the collapse of Equitable Life: because it, rightly, chose not to pay its sales staff commission, they were less motivated than the competition and it had to resort to offering guaranteed annuity rates that were unaffordable and which eventually bankrupted it.
Finally, though, as the last of the sickly foals has hobbled out of the stable, the FSA decides that it will close the door.