Aegon: FSA legacy ban wording will hit advice

Aegon has warned that the current wording of the FSA’s ban on legacy commission will penalise advisers focused on providing ongoing advice and undermine the aims of the RDR.

The FSA’s consultation on the treatment of legacy assets last November confirmed its intention to ban legacy commission despite widespread industry opposition. The FSA 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 after the RDR.

Aegon has questioned the FSA about whether it is supposed to interpret the legacy ban as meaning that any advice on a pre-RDR policy given after December 31, such as switching funds, will halt all ongoing trail commission arrangements as well.

Head of regulatory strategy Steven Cameron says: “There has been a conscious shift by advisers looking to build a sustainable business model which remunerates them for ongoing services to their customers.

“If the FSA were to require future commission on excising assets to be switched off, it is those advisers who will be particularly penalised.

“We believe this would be particularly unfair as this move is inconsistent with the aims underpinning the RDR.”

Aifa director general Stephen Gay says: “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 before the RDR remains.”