Advisers accused of commission ‘cramming’ on GPPs

Commission-hungry advisers are “inundating” providers with group personal pension (GPP) quotes to make quick cash before 2012 instead of investing in transitioning their business models, national IFA Origen says.

Stephen Greenstreet, managing director of the Aegon-owned distribution business, says national account managers at a number of providers have told him they are being flooded with new GPP business.

"But this is only because, on 31 December 2012, this option will disappear because of the removal of commission," he says.

Later on this year, the FSA is expected to confirm advice on GPPs should be paid for on a fee basis, even if employees receive no individual advice.

Instead, employers will need to arrange to pay an upfront fee to an adviser, or arrange for employee pension funds to be deducted in order to pay for any advice taken.

It says a form of adviser charging, called ‘consultancy charging', will become the remuneration method for those advising on GPP business.

Greenstreet says the rise in new GPP quotes suggests there is still resistance among advisers to transition.

But he argues those advisers putting energy into chasing commission instead of moving towards client agreed remuneration (CAR) are making a choice - quick cash today over investing in long-term gains, he says.

"If they are doing this, to what extent are they developing their corporate model for the future? Those IFAs who are making money off of that kind of business are living for today instead of getting ready for tomorrow."

Origen's director of client services Warren Page says "hiding" behind commission is "short-termist and potentially dangerous for advisers".

"Advisers should be laying down a model now which employers are happy with going ahead. But some are still looking to their immediate income, and have not even considered the future shape of their corporate model.

"They have their heads in the sand, and may lose clients in both the short and long-term."

Origen says lack of information is no longer an issue, as with just over two years to final implementation, advisers should know what they need to do to become compliant, says Greenstreet.

However, others argue advisers' apparent lethargy toward change is because the difficult trading conditions mean they have their minds elsewhere.

Richard Howells, intermediary sales director at Zurich UK Life, says after visiting advisers for the past 18 months, he can categorise them in four distinct groups.

He says: "Some have no idea what to do and want my help, while others are fairly sure where they are headed but wouldn't mind a bit of guidance. Then there are those who know precisely what they are going to do and are just after a bit of help.

"But there is a fourth group. Advisers in this category can't even think about the RDR. Their concern is about looking after their clients and staying in business. Everything else - exams, labelling etc - is just ‘stuff for later'. Most advisers are in this last group."