Providers are split on how they are handling trail commission on older policies with Standard Life, Scottish Widows, Aegon and Friends Life all confirming they will turn off trail in a minority of cases when non-advised transactions occur.
In contrast, Skandia, Legal and General, Zurich, Scottish Life, Aviva and Prudential have reassured advisers they will not switch off trail commission on any legacy products when clients carry out non-advised transactions.
Under its RDR rules, the FSA outlined a number of non-advised transactions that can take place without trail commission having to be cut.
However, Standard Life this week announced it will switch off trail payments on 12 of its legacy products when clients carry out certain non-advised transactions on their investments. Standard says the products affected represent less than 5 per cent of its commission book.
Aegon, Scottish Widows and Friends Life all say that certain non-advised transactions within some of their products will also result in trail being switched off. Friends Life says this accounts for 1 per cent of its commission book while Widows and Aegon could not give details of how much trail will be affected. Aegon says the move to scrap trail will only affect older contracts “in the relatively rare situation where contributions are incremented” as it cannot split the policy.
Phoenix refused to reveal its policy on trail commission.
Standard says allowing trail to continue on the affected products would be “prohibitively expensive and complex”. It will switch off trail if a client increases or restarts regular payments, adds or changes their indexation or makes ad hoc payments to a policy. It will retain the trail and says the commission will not be passed to the client because the payments were a “marketing expense” rather than taken from the individual’s policy. It has refused to reveal the amount of trail involved.
Head of RDR proposition and implementation Ross Easton says: “Because implementing the legacy rules in full across all our products and systems would have been prohibitively expensive and complex, in a very narrow number of circumstances we are switching off trail commission where a transaction is carried out by a customer.”
An L&G spokesman says: “We continue to pay trail commission on all legacy products and we currently have no plans to change that.”
PMI Independent Financial Advisers director John Stewart says: “It is disappointing but not surprising. Advisers rely on their trail commission as ongoing payments with which they fund their businesses.”
Separately, Kames Capital says it will continue to pay trail commission on reinvested income related to pre-RDR advice, despite many rivals cutting off the payments.
Ignis Asset Management, Jupiter Asset Management, Artemis Investment Management, Henderson Global Investors and M&G Investments have confirmed they have cut any trail commission on income reinvested post-RDR despite it not coming under the RDR ban. They blame the costs involved in changing their systems.