Call to scrap commission

The Financial Services Consumer Panel is calling on the Financial Services Authority to scrap commission payments to advisers.

But one broker says he has to earn an average of £1,250 in commission and fees on each mortgage to make it worth his while.

The FSCP, which acts as an independent voice for consu-mers of financial services, says the regulator must restructure the way advice is paid for, to avoid mis-selling scandals.

This follows a warning in the June 11 issue of Mortgage Strategy by consumer champion Paul Lewis that there is a conflict of interest when brokers charge fees and also receive commission.

John Howard, chairman of the FSCP, says: “Establishing a new system of paying for advice could be the most important development in the fin-ancial services sector since the FSA was created.”

The regulator says it is considering the future of commission in its Retail Distribution Review which was set up at the beginning of 2007, the findings of which will be revealed this week.

But Andrew Botte, director of Chase Evans Homeloans, believes fees are a fair and transparent way of charging consumers for high quality, professional advice.

He says: “I need to average £1,250 per mortgage deal in commission and fees to make my business viable. If the regulator’s review means I can’t earn that much, I will put down my pen and go into selling cars instead.”

David Hollingworth, mortgage specialist at London & Country, which does not charge fees and is commission-based, says: “If the FSA outlaws the payment of commission and more advisers have to charge fees it could put consumers off seeking financial advice.”

And Linda Will, managing director of Accord Mortgages, adds: “It has yet to be proved that there is any consumer detriment from the commission model as most brokers aren’t influenced by it and ensure their clients get the right deals, particularly as the commission paid on mortgages is relatively low.”