How do you make a Maltese cross? The answer, as any schoolboy knows,  is “poke him with a sharp stick” (although do not try this with someone from Venice, without due care and attention, as it may cause visual impairment . . .  according to the same old joke-book). How do you make an IFA cross? The answer, as this editor has learned, is “invite Andrew Fisher of Towry Law to poke him with a sharp critique” (although those advisers from around the country who alleged a blinkeredness, if not a blindness, in his guest column should know it was not undertaken without due care and attention).

Last week, following the Financial Services Authority’s announcement of a ban on commission payments for advisers, I invited Andrew to give his view on the relative merits. “Hooray for the end of commissions!”, “Commission is at the heart of all that is wrong in the financial advice industry”, and “Inherent ‘product bias’ will not exist in the new world” was the kind of unequivocal response you’d expect from the chief executive of the UK’s largest fee-based financial advice group. Expect, yes. But accept . . .  not quite – if e-mails from wounded IFAs are a guide.

Neither Peter nor Christine Caton, of Caton Fry Financial Services, recognised each other as “the adviser who advises the highest commission- paying product from the highest commission-paying provider”. Nor could they agree with Andrew’s criticism of £200,000 investment bonds, on which 7 per cent commission could earn an adviser £14,000 for an hour’s work. “The assertion made that ‘investment bonds are of no benefit to most individuals, but continue to sell in millions’ is inappropriate and untrue,” they wrote. “Furthermore, the statement that advisers typically take 7 per cent commission on, say, a bond of £200,000 is equally misleading and factually incorrect.”

Typically? Perhaps not, and clearly not at Caton Fry. Some advisers must be taking 7 per cent, though – if they weren’t, why would providers still have to offer it? And factually incorrect? Almost definitely not. Some advisers are clearly selling bonds by the shelf-load, as MetLife calculates that the market for unit-linked bonds in the UK is still worth £12bn a year, and Defaqto research has found that investment bonds remain the most popular product sold by financial advisers after pensions and Isas. Admittedly, not every client will invest £200,000, and earn an adviser £14,000 an hour. But if the average investment is nearer £10,000, then sales must be in their millions.

Alan Goggin, of Birkett Long, does detect bias – but in these pages, rather than in the law firm where he works. What really got on his nerves was the “holier than thou attitude” of Andrew Fisher and his colleagues at Towry Law – “especially as I believe that the company was founded upon a commission-based system”.

Alan argued that market forces and disclosure are enough to curb excesses. Commission cannot be concealed, he pointed out. “A key features document has to show all charges and reduction in yield figures.” As a result, he believed the majority of IFAs did not accept maximum commission.
“To ban everybody for the actions of a few is illogical. The majority of cars produced in the UK are capable of exceeding the speed limit and I’m sure some do, but it would be illogical to ban all cars just because of a minority of drivers.” Clients unhappy about commission would soon take their business elsewhere, he concluded. “It is precisely the option of transferring this fund-based commission to another adviser which has kept IFAs providing the very best service to clients.”

Others suggested the real debate was about “independent” versus “restricted” advice – especially as truly independent advisers offering the best low-cost products could still end up classified as “restricted”. Stuart Fowler, of No Monkey Business, pointed out that a firm offering “1000s of underlying investments from 100s of product providers . . .  would not be enough to meet the ‘whole of market’ definition necessary to be ‘independent’.”

Tellingly, though, all three advice firms already operate on a fee basis. Caton Fry agrees the cost of advice before business is commenced, and “the client is offered a fee basis direct or a rebate of the commission as appropriate”. Birkett Long already offers clients a “choice of how they pay . . .  some are fee only, some are commission only, and some are a mixture of both.” And No Monkey Business . . . well, the name tells you that it charges flat fees only, “to remove the sources of consumer detriment arising from the industry’s current charging methods”.

Holier than thou? How can you be, when you’re preaching to the converted?

matthew.vincent@ft.com