FSA to clarify rules on trail amid concerns
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The FSA has confirmed that it will issue a clarification of its position on trail commission under the retail distribution review following industry concern.
Aifa is lobbying the FSA over concerns that advisers who change their authorisation may lose trail commission.
It says: “One of the most contentious parts of the rules is the ambiguity over legacy renewal being received prior to the RDR and whether it will be allowed to continue.”
Aifa says it was originally clear that trail must stop if there was a change to contract or policy.
But it says: “The FSA has cast doubt on this due to comments made which would seem to indicate that it would cease if a firm moved from being directly authorised into a network or vice versa or if the firm or client bank was bought or sold.”
An FSA spokeswoman says the regulator will clarify this in due course.
She says trail will not be allowed on new business after 2013 but where an adviser has an existing relationship with a customer before 2013, they can continue receiving trail on business written before that date, provided there are no changes to the product offered or anything requiring a new contract with the customer.
The spokeswoman says: “If a customer’s business relationship with an adviser spans the current period and into 2013, that adviser will be able to continue receiving trail commission for the business they set up with that client prior to 2013, provided there are no changes that lead to a product becoming a different product or requiring a new contract with the customer.”
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Readers' comments (12)
lol | 13 May 2010 9:33 am
Clear as MUD
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Incompetent Regulators Awards Team | 13 May 2010 10:47 am
Lets not forget FSA, FOS and FSCS were introduced under New Labour alongside RDR. This is our last chance and perfect timing to lobby against the RDR implementation. The likelihood is your local MP will either be Lib Dem or Conservative. So I say get down there and lobby now as I am already talking to my Lib Dem guy to try to make the difference whilst all the discussions and changes are happening at the top level of government.
Only today we have also had Hector Sants being reported in the papers that he warned his staff about the Conservatives plan to scrap the FSA. This shows so much biased against the spirit of impartiality of what the regulator should represent. He should be sacked immediately without a pay off. This alone is a good reason in itself to scrap the FSA. But that may be too much to ask at the moment.
My reasons to my MP re RDR
1) I am already qualified, passed my exams and have 30 years experience so why should I take more exams to keep my job? Many will lose their jobs and fewer people would get independent advice if RDR goes ahead
2) Clients will not pay fees for advice, the RDR will disenfranchise the public even further from receiving any choice apart from banks. Why not let the public choose between fees or commission based products
3) Clients will not take out loans to pay for advice, I have never heard anything more stupid coming from the FSA
Other points on separate issues:
All FSA, FOS and FSCS staff should be made personally accountable for mistakes and recourse for these cock ups must be compensated by the individual staff in question
All regulatory staff must involved in compliance and judging IFAs mustat least hold the same qualfications if not higher
Any FOS complaints lodged by disatisfied clients must be accompanied by a minimum £200 cheque which is refundable - All FOS adjudicators and Ombudsmen must be highly qualified
That's just for starters, so get down to your local MP and kick ar*e as it's out last chance.
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Pissed Off IFA | 13 May 2010 1:14 pm
Once again I.R.A.T., I totally agree with you. Our local MP is Labour. There are few MPS up here that are not Labour and only one Tory.
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You must be joking | 13 May 2010 1:41 pm
Whose money is it?
This is where the FSA really show a lack of understanding.
The money (from trail) surely "belongs" to the client and surely it is up to the CLIENT to decide where that money goes.
If the CLIENT wants it to go to the former IFA, which is unlikely, that's THEIR CHOICE.
If the CLIENT wants to have it rebated and then pay is to the new IFA, complicated but plausible, that's THEIR CHOICE.
If the CLIENT wants it to go to the new IFA to pay for/towards the service being provided, surely the most likely, that again is THEIR CHOICE.
I know we still live in a democracy as we had a laughable election last week and whilst the afterevents were laughable, it does still prove the UK population has a CHOICE!
I don't remember anything in the FSMA2000 which gave the FSA authority to remove that choice?!?!?
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Anonymous | 13 May 2010 1:46 pm
Totally agree with above synopsis! Every IFA who doesn't want to be bankrupted by every increasing Product Provider's cock-up's ought to be lobbying hard with their new MP.
It probably is last chance saloon for the IFA & GENERAL PUBLIC AT LARGE TO BE SAVED FROM THE BANKS!!!
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Patrick Schan | 13 May 2010 2:15 pm
I can't understand why trail commission is regarded so poorly by the FSA and their apologists (except for wanting to wipe IFA's off the face of the earth of course). The half percent trail I get is for servicing the client and I won't have anybody tell me it's not. Why do I spend morning, noon and night at the office then? Certainly not because I'm having fun.
Why should providers be able to charge the client between 1% and 2% per year annual management charge? What is that for then? Isn't that like trail commission? They don't service my clients as well as I do and they don't advise them when to make a free switch in and out of funds. And why should providers charge the client a percentage of their initial investment but it's us that get criticised for getting paid commission, which is pretty much the same thing.
My MP is Tim Loughton (conservative) and I have seen him twice and written to him often without any evidence that he has actually done anything about my concerns.
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Simon Mansell | 13 May 2010 2:41 pm
If a change of status will trigger the end of trail post RDR then we may as well all give up and sell up now.
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Simon Mansell | 13 May 2010 2:49 pm
Trail is often taken in lieu of initial commission and is more in keeping with the FSA objectives of ongoing service and TCF. In addition to this many IFAs take trail as a fee and back this up with a signed contract/fee agreement. As far as I'm aware the FSA is unable to force one party or another to breach a valid contact?
Would the FSA rather reward the hit and run merchants who take all their fees upfront and are then never to be seen again?
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Anonymous | 13 May 2010 4:45 pm
We cannot go on strike as such but why not have a no adviser day in protest at all the crap the fsa throws at us?
This will give people a foretaste of what things will be like after the rdr kills us off.
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Steven Martin | 15 May 2010 6:50 pm
@ Incompetent Regulators Awards Team
If I was your MP I would reply as follows
1. If you are not qualified to Diploma level you have not demonstrated that your are competent to do your job and be trusted with your clients money and futures. Experience without matching qualifications is not worth the paper that it is 'not' written on.
2. Clients will pay fees if you offer something they value. The HNW market has paid fees for a long time and the mass market happily pay fees to those that have a clear service proposition that they can understand and attach a value to.
3. People pay many things via a loan - or as its know a 'credit agreement', rather than pay it all upfront e.g. car insurance. I don't see why they wouldn't do it for advice they value.
Why do so many continue to complain about raising standards? I for one am looking forward to those who object leaving or being kicked out of the industry only once we get rid of all of the unqualified non impartial advisers will the public accept that we are a profession not an industry.
Incidentally, i assume people use a moniker on here as they wouldn't want their clients to know that they have no interest in meeting standards put in place for their benefit.
Steve
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