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Urgent clarity needed on FSA's trail stance

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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.

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Readers' comments (14)

  • So thats all right then,Will someone please wake up the FSA
    and tell them there stance is confusing,unfair,illogical and arrogant.

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  • So despite other intelligent, informed industry professionals suggesting that the FSA's position is unclear, the FSA remains adamant that its position does not require further clarification.

    Somebody needs to advise Mr Sants that clarity is in the eye of the beholder.

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  • Senior industry figures asking for clarification but the FSA says "no clarification is required". Nuff said.

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  • The FSA statement just simply confirms what an arrogant bunch they are. The FSA are not regulators, they are a dictatorship. Practice what you preach FSA. Can you imagin what would happen if a client rang to clarify a point in a report and the client was told "no clarification is needed, the report is quite clear"

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  • How can the FSA spokesperson say no clarification is necessary when providers are clearly asking for help in trying to interpret the rules.

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  • Of course clarification is needed, and needed quickly. The FSA's position is not clear and them saying that it is doesn't help. As in many other aspects of the RDR, the lack of clarity here will cause problems for all parties in the future. Clearly the interpretation used by Aegon and others is correct this would cause cost as well as detriment to just about everyone involved. It would be very easy for the FSA to issue a statement now either confirming the Aegon interpretation or explaining what they actually mean.

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  • Perhaps we will need to use the service of translators as well as compliance people after 2012.
    It looks like the FSA do not actually know what they mean, hence the statement "no clarification is needed" They cannot clarify that which makes no sense.

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  • How can they provide clarification when they clearly don't have a clue about what they're doing?!! Sick of it all now!

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  • I think the main problem is that FSA staff don't understand the problem so don't know what to say.

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  • All the focus seems to be on old business and trail being turned off.

    What is the position for old business I've 'inherited' where the original adviser took initial, no ongoing, in the same vein that ongoing advice post RDR may stop trail commission, will providers allow product charges to be put in place on those but also all the business where currently no adviser charges are built in?

    ie why should trail stop but no product adviser charges be able to started too on old business post RDR?

    I'm still confused on this - can anyone clarify?

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