Could Commission Disappear?

Over in the UK there is a bit of debate going on about whether commission is a defensible form of remuneration at all. Started by their regulator there is a slightly other-worldly feel to the debate: the main opposition party has effectively said it will scrap the regulator, shifting its functions elsewhere. Combine that with a certain industry complacency about the status quo, and it might make it easy to mock such a question – but our near neighbor, Australia, is also beginning to debate commission.

The supposed evil of commission is that it explicitly ties remuneration to this transaction - overwhelming the good intentions and ethics of the adviser in a way that a salary does not. The problem is that the great thing about commission is… that it is explicitly ties remuneration to the transaction, overwhelming the desire to do anything other than call potential clients with the desire to make more money. The arguments will tear to and fro. The simplicity of banning commission, the nasty ring that commission has in the ear to many consumers, and their instinctual dislike of ‘middlemen’ will ensure there are plenty of willing listeners. But the problems that come with commission come with payment in almost any form – consider a salaried adviser struggling to make budget. Suddenly instead of a single commission being at stake in one sale, near the year-end their job – or even career – could hinge on just one sale. 

Perhaps we should hope that the UK’s FSA can hurry up and ban commission as a kind of large and hopefully decisive experiment – we can then leave it to the market to decide how best to pay people. Some get salaries, some get commission, and some charge fees – some a mixture.

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