Financial advisers should no longer be paid by commission, says the panel which represents consumer interests to the regulator.
John Howard, chairman of the Financial Services Consumer Panel says mis-selling scandals can be traced back to commission.
And he says consumer confidence in financial services would be restored if commission was ended.
We asked for your comments, a selection of which are below. This debate is now closed.
I am sick to death of hearing highly paid regulators telling the rest of us that clients should only pay fees to advisers and that we should scrap commission. It is OK for them because they can afford to pay fees. The vast majority of people in this country prefer to pay by commission because finding an upfront fee is difficult for many of them. People should have the right to choose. We should also stop calling it "commission" because at the end of the day it is a fee for work carried out, not some sort of windfall bonus payment to the adviser.
Andrew Davenport, Wellinborough
I have knowingly consulted a financial adviser only once. I wanted advice about how best to manage my money. She advised me to purchase critical illness cover and was paid commission. I am fairly sure I do not need this policy. Prior to this, I was mis-sold an endowment by somebody I thought was representing my mortgage provider, but it turned out, 15 years on, to have been an IFA. Later I was mis-sold a pension. I don't wish to be sold any so-called financial "product" but I want impartial expert advice about how to get out of the difficulties I am in. I would be prepared to pay for this. Commission simply makes IFAs need to sell instead of advise.
Barbara McNeill, Sheffield
IFAs have a legal obligation to disclose the amount they are earning in actual monetary terms. We discuss this issue quite clearly with every client. The FSA is inferring that "fees" are good whilst "commission" is bad. Commission, if disclosed properly, is a perfectly acceptable method of payment and one which many of our clients choose. The FSA lives in world far removed from reality and thinks that if commission was banned then bad advice would be a thing of the past. How refreshing it would be if John Howard spent as much energy on promoting the positive side of good professional financial advice instead of pursuing fanciful, and out-of-touch ideas.
David Winter, Fareham, Hants
I totally agree that the murky commissions system on financial products creates a major conflict of interest for the IFA which disadvantages the public. I have been looking into pension income withdrawal products and am amazed at the attitude of IFAs who believe that they and their 3% initial charge are the only route to an income withdrawal arrangement. Sadly they are almost correct. This monopoly needs to be brought to an end.
Jack McVey, Uddingston
Sadly mis-selling does exist and no amount of regulation will stop it. It is down to the individual to give professional, unbiased advice. If you remove commission and go totally fee-based then you will have some clients paying a small fee for advice and others, in effect being ripped off. How much research is an advisor going to do if the fee only represents an hour's work? Mortgages are well regulated but poor advice still exists, many people are purchasing products and paying over the odds because their advisor does not use the whole market place. Then you have secured loans, people consolidating their credit cards and securing it on their homes, and this is not regulated! Where there is money to earn there will be those looking to take advantage.
David Fairey, Herts
The best solution would be for IFAs to charge a fee in the manner John Howard described it, however the general public overall does not want to pay fees for proper independent advice. This in my opinion derives from a lack of financial education. Too often financial matters are seen as boring or are addressed too late. In my opinion to improve this situation the government would be wise to take steps at educating the public in financial matters. I find programmes like Money Box very good indeed at informing/educating the public. On the other hand I do not rate financial advice in this country. However, there are an increasing number of IFAs who do put the welfare of their clients first.
Louis d'Espagnac, New Milton
I cannot understand the hypothesis that consumers do not benefit from the "choice" of how to pay for financial advice. Removing the option for the product provider to subsidise the advice process for the client by paying a commission will surely reduce access to high quality financial advice for a large number of people. It is further my understanding that the majority of mis-selling was attributable to the product provider and bank tied agents who, under these proposals, will be the only avenue available for many consumers. It seems totally counter-intuitive.
Neil Stevens, Chester
IFA for 33 years. Never sold a contract unless I would have bought it myself in the client's circumstances. Wealthy clients can afford fees but Joe Public can't and they are the people that need the advice the most. The public needs the choice. IFAs not to be trusted? Maybe a few years ago but not anymore. No, I'm fed up with all the bad publicity. What about the FSA making our job easier by introducing an understandable "risk-rating" matrix to guide the public rather than waiting for problems to occur then hanging the IFAs out to dry.
Ian Southgate, Westcliff-on-Sea
I am a whole-of-market mortgage adviser who gives advice and recommendation. By financial authority rules the product I select for each customer has to be the cheapest possible. Each lender pays me a commission for recommending their products when the mortgage completes. I also charge an administration fee. Commission varies from lender to lender but I have to prove in every case that the cheapest product available been selected. If commission is no longer paid then customers who don't want to pay or can't afford broker fees will go direct to lenders. Individual lenders usually only have a limited range of products, they also usually only provide an information-only service. I believe that this would see a far greater number of consumers ending up with the wrong product than the current system.
People think that anyone in the insurance world should work for nothing. Only the upper end will pay a fee. If we cannot charge a fee, then we have to have a commission-based product. If commission ends so will independent advice. I never look at the commission amount before selecting a product.
Jon Baxter, Stanmore
A lot of people simply cannot afford to pay for advice by way of an upfront fee and advice should not just be for the wealthy. Also the commission is confirmed in writing and there is always the option to ask to pay by fee for those who can afford it.
Ian Thorneycroft, Stoke
We were mis-sold an endowment in the 80s. I am convinced that had the sales person not been paid on commission, the chances of us being mis-sold would have been reduced. What we really need is absolute transparency. At the point when products are recommended, advisers should be legally obliged to show customers, in writing, what their commission will be. Other potential solutions can be tricky. Companies understand that the alternative - making customers pay for advice up-front - can have an adverse effect on sales. So only a rule which forces this on all players in the market would work.
Larry Jay, Kent
I am totally disillusioned by IFAs. I am 74 and my thinking is slow. I wanted to have the option to pay for financial advice but was lost when it came to making the purchase. It was only after when the recommended package was purchased that I discovered two issues that I had been "saddled" with, they were: I had been charged £1,700 for the purchase of £50,000 of investment. The company that my IFA had selected, I later found out in a Sunday newspaper, was giving a 40% inducement to the IFA for the purchase of buying its policy. The industry needs to protect people against this kind of practice when people who are ignorant in this field.
Reg Proudfoot, Kent
The comments we publish are not necessarily the views of the BBC but will reflect the balance of views we have received. It is helpful if contributors state if they work for any organisation relevant to an issue discussed. Readers should form their own views on whether messages published represent undeclared interests, or views prompted by a common source.