This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.
X
MM+cover+small+241014
Categories:Other,Regulation

11 months to go and still confusion over trail

  • Print
  • Comments (5)

It is pretty shambolic that with 11 months to go until the introduction of the retail distribution review the industry is still calling for clarity on the future of trail commission.

Reading a number of responses to the FSA’s recent legacy commission consultation paper, trade bodies still have concerns about the future of such a fundamental part of many firms’ income streams. In this week’s Money Marketing, Aifa director general Stephen Gay warns the FSA’s stance on trail commission is still open to interpretation and has called for the issue to be “clarified beyond any doubt”.

Throughout the RDR, the FSA has pledged that trail commission from pre-2013 business can continue to be paid and included this point in its final rules published late last year. This was based on concern about the effect retrospectively tampering with trail would have on the IFA industry and the legality of any such move.

However, the wording of the FSA’s legacy consultation paper has led to worries that giving any kind of advice to a client would lead to all trail being turned off. The paper states that trail can continue if it is “payable for advice provided pre-RDR”. Aegon and others have pointed out that this can be interpreted as meaning that if any post-RDR advice is given all trail must cease. 

Aifa has called for clarity  on what constitutes the “termination” of a product for the purposes of trail commission while various providers and advisers are unclear whether fund switches, or switches within packaged products, would end the trail agreement.

Many advisers have built up their firms on the recurring income received from trail and have made assumptions on the future of their businesses on the basis of the FSA allowing trail to continue.

The RDR will herald a more transparent way of charging but it was never agreed that this charging model would apply retrospectively for very good reasons.

In its haste to meet its arbitrary RDR deadline, the FSA has already refused to revisit its cost benefit analysis on the effect of the legacy commission ban on providers, despite most providers basing their original feedback on costs to the regulator on completely different assumptions to the final rules.

The costs and benefits associated with the RDR have been developed under the assumption that trail commission will remain for pre-RDR business. Any radical deviation from this agreement from the regulator should require a proper cost benefit analysis and consultation.

With the RDR clock ticking, the FSA must make its intentions clear as soon as possible.

Paul McMillan is the editor of Money Marketing- follow him on twitter here

  • Print
  • Comments (5)

Daily Email Updates
If you enjoyed this article, sign up to receive the latest news and analysis from Money Marketing.

The Money Marketing CPD Centre
Build your annual CPD - you can log and plan your CPD hours for free with The Money Marketing CPD Centre.

Taxbriefs Advantage
Advantage is a digital reference source giving unbiased, independent, answers to your technical queries. Subscribe to Taxbriefs Advantage.

Readers' comments (5)

  • I told the regulator that the more I look at this the bigger the pickle we will end up in.

    Silence

    Unsuitable or offensive? Report this comment

  • Anyone in their right mind will have now lined up alternative income streams to retail investment advice. There is no clarity, so no serious business planning can be done and therefore no guarantee of a viable future business model. Plan B required urgently by all sane parties who don't already have one.

    Unsuitable or offensive? Report this comment

  • We're all doomed. Get out now.

    Unsuitable or offensive? Report this comment

  • Finally, somebody talking sense!! I agree with Tricia, we are all doomed.

    The FSA will not stop trying to drive us out of business so that ALL financial advice will be given by the Banks.

    Unsuitable or offensive? Report this comment

  • As a product provider; it is not just unclear it is contradictory, on one hand we know that a customer can transfer adviser and the trail will flow to the new adviser, er.. right up to the point that new adviser suggests a switch and the trail ceases.

    We also want to know what happens to non advised increments, are we allowed to pay more than 100% allocations? We think pocketing the commission and paying 100% or less is not TCF, so whats it to be.

    Come on FSA! this is basic stuff we already had asked about but was not clarified at all in January. We have to make system changes involving external suppliers, time is running out and costs are rising.

    Bear in mind some trail commission function starts computing 12 months in advance and we are already inside that window.

    Unsuitable or offensive? Report this comment

Have your sayEdit my profile/screen name

You must sign in to make a comment

Fund Data

Editor's Pick



Poll

Do you think Citizens Advice is capable of delivering a good at-retirement guidance service?

Job of the week

Latest jobs

View all jobs

Most recent comments

View more comments