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Commission for new investments will be outlawed from January 1 next year, although rebates from existing investments will continue to be paid. The Financial Services Authority (FSA) argues that this will reduce the potential for conflicts of interest, and make fee structures more transparent for retail investors.
However, the regulation is likely to lead to a significant reduction in the number of IFAs, with many struggling to change to a new business model relying on upfront fees from clients, rather than commission from product providers. Many older IFAs are also expected to retire rather than study for the more advanced qualifications that all advisers will be required to hold.
The FSA denies that more stringent requirements on IFAs will also increase their costs, arguing that costs will be no higher than before. It says clients will be able to agree a fee with their IFA, and arrange to have it deducted from the returns on their investments.
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