Trail cash could go to client if they switch adviser
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Clients moving to a new adviser may be entitled to receive the trail commission previously paid to the old adviser.
New rules introduced under the RDR will prevent advisers from receiving trail commission for past business written by a client’s previous adviser.
The FSA says: “The position of any trail commission relating to products bought through a previous adviser will depend on the agreement between the product provider and the previous adviser. That agreement will determine whether the trail commission continues to be paid to the previous adviser or can be switched to the new adviser.
“Where the commission can be switched, we would expect it to be paid to the client, given that the new adviser did not provide the service for which the commission was payable.”
The regulator says it will monitor advisers in the run-up to implementation of the RDR at the end of 2012 to ensure firms are “not seeking to tie consumers into commission-based agreements against their best interests”.
Highclere Financial Services partner Alan Lakey says: “It is surprising that the FSA has taken this position because when advisers inherit new clients they can use the trail commission to review client holdings and even hold meetings with the client without having to impose additional charges.”
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