The advice sector continues to debate the future of risk commissions on two fronts. Firstly, will risk commissions be given a reprieve following the outcome of the 2022 Quality of Advice Review? And if commissions are retained, will it all be for nothing if the current 60/20 cap means many or most risk specialist businesses will prove to be unsustainable…
- Disagree (70%)
- Agree (23%)
- Not sure (7%)
A 60/20 commission model remains a bridge too far for most advisers when it comes to sustaining a viable business proposition – but it seems some advisers are reconsidering this question.
As we go to print with the results of our latest poll, around two in three advisers (65%) say the current 60/20 commission model isn’t enough to sustain a viable risk-focussed advice business, while 27% say the 60/20 model will work, and 8% are undecided.
While the majority opinion rests in those who say the 60/20 model isn’t commercial, we note the 27% who say it is, especially when compared with only 6% of advisers when responding to a very similar question in early 2021:
While we appreciate this February 2021 poll asks a slightly different question, the result so far in our latest poll tends to support the possibility that more risk-focussed advisers may be finding a way to streamline and structure their business proposition under the present 60/20 commission caps brought in with the Life Insurance Framework reforms.
That said, the prevailing view is articulated well by regular contributor, Jeremy Wright, who comments that the question of what is a reasonable commission to make it feasible for advice practices to provide best interest duty advice, comes down to two simple points, namely cost and risk. He says that in the current climate:
…60/20 is not enough and if 80/20 becomes the new benchmark, that will help alleviate the COST part of the equation
“…60/20 is not enough and if 80/20 becomes the new benchmark, that will help alleviate the COST part of the equation, though does not help with the RISKS, whether real or perceived.”
The risks to which Wright refers relate to regulatory risks for advisers being the big ‘unknown’, but he seems to still represent the majority view of the adviser community in advocating that 80/20 works in a commercial sense, whereas 60/20 does not.
Where do you stand on this question? And has your view changed at all over time? Tell us what you think as our poll remains open for another week…