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BSA live: Commission drives mis-selling in financial services
The way the financial services industry can protect itself from any mis-selling scandals in the future is by getting rid of commission, warned BBC Moneybox journalist Paul Lewis at the BSA annual conference.
He explained to delegates how commission leads to a “conflict of interest between adviser and client” and has been behind every mis-selling scandal seen in the last 25 years.
“Commission will remain for insurance products and the FSA has made it clear that it won’t be banning commission on sale of mortgage products.
“Commission is the driving force that leads to misrepresentation. It drives the sales person to put their own interest ahead of their client’s interest and what does misinterpretation mean when it comes to money? It can mean fraud,” said Lewis.
Speaking in the same session at the conference, Robert Parker, head of the Strategic Advisory Group at Credit Suisse discussed how the Bank of England’s Quantitative easing measures have yet to take effect.
“Banks and building societies are deleveraging. RBS has reduced its balance sheet by £700bn which means credit conditions remain tough.
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“One of the problems is the low velocity of money. This means that we have low interest rates and the Bank of England pumping money into the system but that money is not being applied or spent on real economic activity so we have this wall of liquidity which is sitting on the side lines.”