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Categories:Advisers

Aifa calls for trail to continue until products are terminated

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Aifa has urged its members to support its stance that trail commission should continue to be paid until a product matures or is terminated in their responses to the FSA’s legacy assets consultation paper.

In its legacy paper in November, the FSA confirmed it does not intend to remove or relax the ban on legacy commission, despite widespread industry opposition. It defines legacy commission as additional commission that may become payable on legacy assets where there has been a change or addition to the product or investment post RDR. The paper also published a table setting out a range of scenarios which it says would amount to advising on investments.

However, Aifa says there is still some confusion about the triggers for ending trail commission on a product.

Aifa director general Stephen Gay (pictured) says: “At present it is not clear what precisely constitutes termination of a product and what is merely switching within a product. It is therefore extremely important to make the case in response to the consultation that switching investments within a packaged product does not terminate the product.

“Aifa strongly believes that a distinction should be drawn between switching within a packaged product and switching between products. If switching leaves a product intact and fundamentally unchanged, for example after rebalancing within a pension, we believe that trail commission should continue because that product sold pre-RDR remains.”

Responses to the FSA’s legacy commission paper are due by January 16.

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Readers' comments (5)

  • Stephen you are so right and it is only common sense that this should be the case. Therein lies the problem - Common Sense. These are two words, when combined, do not form part of the FSA's dictionary and so I wish you luck, but any way the FSA can think of to get rid of the word commission they will unfornuately follow through.

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  • Instead of trail commission can we not rename it Annual Bonus.

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  • I completely agree with the article. As the FSA 'clarification' stands, however, you seem to lose the trail commission if you advise an internal switch. You lose it if you advise against an internal switch and you should lose it if you are not continuing to give ongoing advice to a client. Talk about Catch 22!

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  • Thanks for your efforts Stephen, keep it up.

    As I understand it, 'non advised' portfolio re-balancing won't effect trail, nor will leaving the whole investment alone, forever. Any prizes for guessing what's going to happen from 2013 onwards...?

    In the meantime, it is a fair bet that many firms with large trail incomes will churn the whole lot in 2012 at maximum initial commission and then service the investment on a fee charged basis from 2013 onwards. Another monster of a mis-selling scandal being made before our very eyes.

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  • An entirely reasonable proposal, but will the FSA take the slightest bit of notice? I wouldn't bet on it.

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