ABI questions how legacy ban squares with TCF

The Association of British Insurers says it is unhappy with the FSA’s decision to ban legacy commission and says it will be difficult to comply with the ban and meet treating customers fairly obligations.

The FSA published a consultation paper last month on the treatment of legacy assets. The paper confirmed that trail commission for ongoing advice could continue post-RDR but legacy commission, payable for changes made to existing products after December 31, 2012, would be banned.

Speaking at a Marketforce conference on the future of distribution in financial services in London yesterday, ABI director of life and savings Maggie Craig (pictured) said: “In our view the FSA was late in clarifying its position on legacy business.

“We have had a lot of conversations with the FSA about this. I cannot pretend to be happy with where we have ended up but in some cases I do have to play the cards that I am dealt.”

Providers’ systems currently automatically generate commission on top-ups to existing investments. It is estimated that if providers were to switch off the commission across all legacy products, the cost of systems changes could run to hundreds of millions of pounds.

Craig questioned whether policies will have to be closed to top-ups, or whether products will end up being moved to get over the difficulties of top-ups to existing products.

Craig said it would be “paradoxical” if the ban ended up driving people to execution-only due to complications with facilitating adviser charging.

LV= head of retirement propositions Philip Brown, who attended yesterday’s conference, raised the issue of how the legacy ban conflicts with TCF.

Craig said: “That is one of the problems we are facing. If we were to say this type of policy is no longer available to be topped up how do we then square that with TCF obilgations? That is one of the reasons we have been talking to the FSA to say while we are now at the point where legacy commission is definitely going to be banned the FSA should be in absolutely no doubt that is not a detriment-free zone.

“We are going to have to continue to work that through. There is no doubt about it, it is the sort of the dilemma that we are going to be looking at as we implement this.”


News and expert analysis straight to your inbox

Sign up


There are 11 comments at the moment, we would love to hear your opinion too.

  1. John Rawicz-Szczerbo 1st December 2011 at 10:16 am

    A FANTASTIC achievement of bias, prejudice and dogma over common sense and pragmatism. Welcome to the Police state. Well done FSA!

  2. The ban on legacy commission should be dropped immediatley. It is damaging to consumers, Providers and IFAs alike. My business has been based on long-term trail income to ensure that clients would return and not be charged for further advice. They all understand and agrees to our term of business and should be regarded by the FSA as legitimate contracts. I may as well just pack up and claim benefits now! Someone stop these lunatics from ruining or livelihoods!

  3. Just another example of how badly the RDR has been constructed and how little the people implimenting and forcing through these draconion changes know about our industry.

    The FSA invented TCF, now it is coming back to bite them on the proverbial rear end.

    Whichever idiot dreamed this stuff should be sacked.

    The RDR will result in only one thing, total destruction of the IFA sector as it is at present and that the consumers respect and like and total consumer detriment to the mid and lower income groups who after all these changes will actually be worse off as the costs of ongoing advice for things like further investments will be disproportionate and have to be paid direct.

    If the best advice is to top up an already good investment, why should a client be forced to renogiate the terms under which the original advice was funded?


    FSA be warned, you are participating in actions which are detrimental to our economic recovery and will disadvantage many thousands of consumers, thus in turn, damaging the reputation and trust consumers have in the financial sector.

  4. Ned | 1 Dec 2011 10:31 am

    Ned I hear what you’re saying but the regulator just doesn’t care!!

  5. Stop it… get with the programme, what service do you provide that warrants you getting trail commission. And ‘total destruction of the IFA sector’… well challenge how ‘I’ .. most IFAs were in the first place, IFA sector does not add much value.. sure flogs 75% of insurance companies products .. but not create value. If you do.. embrace RDR then you can charge for the ‘value’ you create not hidden under commission

  6. Anonymous 12:56pm

    FSA mole ?? Stop hiding and if you wish to criticise the IFA industry, at least have the guts to make yourself known !!

  7. it makes sense to ban commission on new one off investments, otherwise the RDR doesn’t make sense. But it doesn’t make sense to ban commission in cases of rebalancing of existing portfolios or regular premiums.

    the trick is to work out how the regulator can regulate such a structure

  8. I would like to put out a national appeal for any spare feet as the FSA seem to need a few more in which to shoot themselves.

  9. Just goes to show how badly thought through the whole RDR thing is. What a crying shame.

  10. Thank you Maggie Craig for your helpful and constructive contribution.
    The FSA is being utterly reckless in forcing gigantic costs on an industry which can ill afford them least of all now.
    Abrogating a zillion legal contracts between provider, client and IFA which specify the terms of charges and remuneration is an unacceptable breach of the rule of law.
    I completely agree with Ned and “Anonymous 10:21” above. “Anonymous 12:56” is beneath contempt, but anyone with a brain already knows that.

  11. Knowledgeable Insider 2nd December 2011 at 12:09 pm

    Welcome to the world of the FSA….the answer is NO what was the question? Such is the world of the inept leading the many with no redress either legal or moral is due…well done the Government for making even Browns legacy look good!

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com