CUSTOMER AGREED REMUNERATION - CRA International

REPORT BY CRA INTERNATIONAL
Intermediaries will only be able to adopt CAR if providers have made the products
available and where they do, they are likely to initially use similar advice charges to
today’s commission structure. Only over time will innovative new structures emerge
and this is likely to correspond to a changing role of nationals, networks and service
providers.
Providers will need to change their systems and also how they compete in the market.
This will also evolve over time. If the regulator provides clear principles and guidance
regarding how CAR should be implemented, the obligations resulting from TCF should
encourage providers to compete for intermediaries through offering better products for
consumers. Alternatively there is a danger that too much flexibility around CAR allows
competition for intermediaries to focus on characteristics that are not necessarily to
the benefit of consumers.
Therefore we conclude that an indicative CBA finds evidence in support of applying
CAR to the non-tied market, with a phased introduction of CAR starting with packaged
investment products. Based on the development of products to date and the gradual
take-up by intermediaries, a 3-5 year time period would be appropriate but will only
be achievable with regulatory support of CAR style models otherwise it will remain only
in market niches. Some benefits from CAR will arise in the short-term after
implementation but changes in consumer behaviour are likely to take longer to emerge
indicating that a longer period of time will be required to assess whether CAR brings
about such behavioural change.
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