Advisers have questioned whether the FCA could legally turn off all pre-RDR trail and renewal commission and if the costs of such a move to the sector can be justified following news that the regulator discussed a cut-off point at a recent board meeting.
Minutes from the regulator’s June board meeting, published last week, set out the “key issues” the board discussed relating to the post-RDR market.
These included “whether the lack of an end-date for the payment of trail commission on pre-RDR business might lead firms to act in ways that risked poor consumer outcomes.”
Jacksons Wealth Management managing director Pete Matthew says: “The FCA might potentially have a legal issue with arbitrarily turning off all pre-RDR trail.
“If it were to go to court, it may be a difficult argument to stand up, and taking that approach could potentially wipe out some advice firms.
“I would have thought the legal question would be whether the FCA can override a pre-existing, presumably legal, agreement.”
Yellowtail Financial Planning managing director Dennis Hall says: “Pre-RDR trail was always going to be on the agenda but any changes the FCA wants to make have to be done one step at a time.
“I do not know that there would be any advisers that would not recommend fund switches at review stage to hold onto trail but there may be a lot of firms that would quite happily ignore a client who is not asking for a review and thus keep the trail.
“Advisers need to take the matter into their own hands and move clients onto customer agreed remuneration.”
Hudson Green & Associates principal Ian Hudson says: “If the FCA was to impose a deadline on pre-RDR trail, trying to manage that would be a disaster. Clients are savvy enough to vote with their feet if they feel they are not getting ongoing service in exchange for ongoing fees.
“The question the FCA has to ask itself is whether it is going to achieve any considerable gain by pursuing this, given the effort it would have to put in to oversee a pre-RDR trail deadline. It may be the FCA’s resources are best used elsewhere on greater priorities.”