Just Because England And Australia Are Banning Commissions Does Not Mean The US Will Follow Suit

Wednesday, June 29, 2011 22:08
Just Because England And Australia Are Banning Commissions Does Not Mean The US Will Follow Suit

Tags: compensation | profitability

Financial advisors in the UK and Australia will soon be barred from accepting commissions. That’s led many experts in the U.S. to say America will follow suit. Is that true?

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I listened to a really smat advisor today who said that the U.S. lags British and Australian regulatory systems by about five years and he predicted the commission ban would become the law of the land here in the next few years. I have my doubts.


As of January 2013, the Financial Services Authority in the UK will ban commission remuneration for the sale of financial products. The Brits have concluded that nearly every financial scandal has been the product of commission remuneration. A similar ban on commissions

becomes effective July 2012 in Australia.



The U.S. does not have the Socialist history of the U.K. and Australia is a fraction (one-fifteenth) of the size of the U.S. market.


America’s 401(k) system is driven by free market rules. That’s not how retirement works in the UK’s pension system, which requires a 12.8% annual employer contribution, or Australia’s superannuation system, which requires a 9% annual contribution from employers.


The approach to investing, business, retirement and regulation is a lot different in the U.S. than in the U.K. or Australia.


The laissez faire approach of the U.S. is not the preferred method of other countries. Just look at our healthcare system versus most other nations.


I’m not convinced the ban on commissions being predicted by some is a good bet, much less the sure thing some are saying it is.

Comments (3)

Are you in Boston today, Andy? Is that how we'a supposed to pronounce Smat? :)
vguettlein , June 30, 2011
What is most interesting in the reports is the recognition that those who obtain commissions are 'distributing' product and compensated by the product provider.

In the United States, FINRA, SIFMA,have convinced themselves and the unsuspecting public that financial sales people or distributors are the same as those selling grey matter, advice.

I have no problem with those who sell for a commission; however; like in the medical field I do not think a pharm rep should be allowed to pass themselves off as doctor.

What would happen if we all just made a simple regulation that brokers were call Financial Distributors and IARs Financial Advisors? Like drug reps they are getting paid by the product provider.
brentb843 , June 30, 2011
Building on Brentb43's comment above, the term that struck a chord with me that I heard at the Australian FPA National conference in November last year for those selling proprietary products for commission; "Financial Product Salesperson." Says it perfectly.
a guest , July 05, 2011

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