When the Retail Distribution Review (RDR) was put into place in 2013, financial advisers were banned from taking commission from investment and pension plans. This included advised annuities.
However, the ban on commission did not apply to non-advised sales which means that non-advised brokers can still be paid commission.
I have long argued that this is unfair and creates an unlevel playing field between advisers and non-advisers as well as introducing the risk of customer detriment and perhaps even mis-selling.
I go even further and ask why anybody would want no advice when they can get jolly good advice where the adviser fee is often less than the commission.
Take an enhanced annuity for £100,000. The commission payable can be as high as £3,300 whereas according to unbiased, the fee for advice on converting a Hundred thousand pounds into an annuity is about £2,500.
My gripe about non-advised annuities is not just about the commission, it is also about the absence of a proper conversation with clients. When a non-advised broker speaks to a client it is like having one hand tied behind their back because they can only talk about one side of the equation. They cannot talk meaningfully about drawdown because that would cross the line and giving advice.
See my article Two-handed-advice
The issue of commission and annuities cropped up again in a reader’s question to Steve Webb on This is Money website. See <p I’m buying annuity 55k pot does broker get commission?
As always, Steve gives a brilliant article and I am chuffed to be asked for a second opinion.