Urgent clarity needed on FSA's trail stance
The FSA has been warned it must urgently address confusion over the future of trail commission payments.
Throughout the RDR consultation, the FSA pledged that trail commission brokered on pre-2013 business can continue to be paid and included this point in its final rules published in November last year.
But since the publication of its legacy assets consultation paper in November, there has been growing concern about the wording in the paper and the implications for trail commission.
The paper states trail can continue if it is “payable for advice provided pre-RDR”. Aegon and others suggest this could mean that if any post-RDR advice is given, all trail must cease. Trade bodies have raised questions about whether trail would be payable on a fund switch or switches within products.
Aifa director general Stephen Gay (pictured) says: “The FSA proposes that existing trail commission cannot be switched off but any further and additional payment for additional advice events must be charged transparently. However, the consultation document with its perimeter guidance is open to interpretation on this and it must be clarified beyond any doubt.”
Aegon head of regulatory strategy Steven Cameron says: “Aegon fully supports the RDR and adviser-charging for new business but imposing elements of this into existing products and adviser/client relationships will create detriment for customers, advisers and providers. Banning trail on post-RDR advice would need a proper cost-benefit analysis and should not be considered for the end of 2012.”
Threesixty head of business consultancy Phil Billingham says: “The FSA has picked bad words to start with, by with using ’legacy’ and ’trail’ and the definitions are causing the confusion.”
An FSA spokeswoman says its position on trail commission has been set out in the RDR rules and no clarification is required. However a feedback statement to the consultation paper is expected to set out a further range of advice scenarios to explain where trail commission would be payable.