11th May 2011

IFA Letter of the week: Opticians and commissions

Opticians and commissions - if the FSA regulated Optometry?

I recently met with a client who happened to be an optician and this sparked an interesting train of thought!

An optometrist derives remuneration in a similar way to an IFA. It takes many years to qualify as a Doctor of Optometry i.e. degree, over several years of study and as a result they are able to diagnose vision problems, diseases of the eye, brain tumors and related diseases. They are of course also responsible for prescribing corrective eyeglasses and contact lenses.

In spite of all this skill opticians make "no money" from testing people's eyes. The business only makes money by selling frames and lenses, a commission based product! In part this is because the general public will not pay for the skills of a professional even if that could detect diseases of the eye or even brain tumors because these diseases are "maybe's", intangibles that may never happen.

Likewise many financial products are intangible products i.e. sold for events yet to occur and in some cases those events may not occur. It is a universal truth that intangible products are always sold and never purchased, a truth denied by the FSA and their Retail Distribution Review!

If the logic of RDR was applied to opticians it would mean telling the general public to pay the true professional fee for eye testing that could only be conducted by a man or women of many years training and at the same time removing the markup on the glasses. Let me tell you what would happen because apparently there are a number of regulators who can't quite "see for looking" and figure it out. If the FSA regulated the opticians and applied RDR to them perhaps 30% of opticians would leave - followed by many more in the years immediately after implementation. The eye health of the UK would falter because the general public "WOULD NOT" pay and as a result many would lose sight, suffer impaired vision and a number of brain tumors would go undetected. There would of course be a wealthy minority who would pay and these in turn would be serviced by a small band of opticians mainly centered on the large cities.

Perhaps it is Hector Sants that needs his eyes testing?

Best regards

Simon Mansell
Temple Bar IFA Ltd

Adviser Letter of the Week, RDR