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Cutting your trail: Which firms are stopping payments on older policies?

Standard Life 480

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.


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There are 15 comments at the moment, we would love to hear your opinion too.

  1. Once more stabbed in the back by banks

  2. I have a client who has an increasing WOL with Scottish Provident
    They sent me the following’ We have assumed that you will not provide your client with advice and have applied your standard terms to the increase in premium.
    If you provide your client with any advice for this plan, you need to tell us so that we can stop the payment of commission.
    If you have confirmed to us that you have given advice to your client, you will no longer receive any initial or renewal commission for this plan from the date that you tell usof the change.’
    I hope the clowns at FSA read this and have a laugh while they pocket their guaranteed monthly pay,
    It sums up the total joke (on us) which is RDR.
    God help us all because no-one else will.

  3. What some providers seem to have rather forgotten is that they are service providers, rather easily replaced.Obviously they need to make a profit – well all do, the question is really whether providers are so far removed from the “coalface” that they have lost sight of the implications of the larger numbers when they are reduced to the minutiae of daily, ordinary life of advisers trying to do their best for clients – fairly.

    Like advisers, they have had years to prepare for RDR and I’m a little fed up at the lack of consistency. Lets all agree some sensible standards and stick to them, otherwise we will see massive movements away from “Providers” with rather unhelpful processes that they designed themselves. The conflict of interest not to “disturb” assets for fear of altering the payment method is utter folly and will be rightly rounded upon by journalists and clients alike.

  4. Is this not breaking an original contract into which both parties entered to their mutual satisfaction? “prohibitively expensive” and sundry excuses cannot be accepted since the individual IFA was not nor is not responsible for the changes affecting the providers.

  5. I don’t think we are talking about ‘trail’ here exclusively. Trail commission is where the intermediary receives a %age of the fund. On old contracts where regular premiums or contributions result in commission being paid to the intermediary at a %age of the premium the correct description is ‘renewal commission’.

    I was gobsmacked by the anonymous post above. 07.03 at 10.08am. I was very glad he/she brought it to our collective attention.
    Can this really be happening.? It is a perversion of all that is sensible and TCF for clients.

    Can you please contact Scot Prov and get them in open forum to discuss this crass stupidity?

    And while you are at it, how about contacting the FSA when you have got the Scot Prov side of their lame story, so we can hear the Canary Towers response to the unintended consequenses of their intellectually bankrupt RDR?

  7. Belinda Cusmans 7th March 2013 at 10:54 am

    hardly confusing is it?!!!!! If the professionals are at a loss, I can’t imagine what the clients must be feeling!

    Does anyone at all understand what is going on?

  8. Anonymous – what is really going on is the systematic dilution and eventual destruction of the IFA sector by the back door.
    Our decades of building up renewal and trail income to place a value on our practices ready for sale and retirement will be gradually eroded and eventually worthless as the providers are doing the job for the FSA of closing down the iFA sector.

    The TSC as an organisation failed even to get Sants and crew to divert or delay the start of RDR and the commission ban, as elected representatives they are useless.

    Call me paranoid if you like, but all that we predicted would come about is happening, more rapidly than any of us could imagine.

    Ah well only 12 months to getting my fantastic state pension !!

    Deep Joy!

  9. RDR was always going to benefit the providers where trail commision was concerned and this is probably the tip of the iceberg.

    It will be interesting to see who benefits from the non payment of ongoing commissions originally costed into the contract.

    My guess is the FSA won’t bother to check as it will be too confusing and complicated to do so and I doubt the consumer will benefit as they should.

    I expect we may well see more consolidation of insurers if closed book business starts to look lucrative as a result of RDR.

    Providers also probably have the upper hand in relation to this from their “terms of business” as I suspect they have planned for such events to ensure it is to their advantage but use RDR are the reason.

    It will be interesting to see who are the real winners from RDR. Watching insurers share prices may give an indication.

  10. @Chris Miller

    Scot Prov have simply laid out what they are doing in accordance with the new rules. If they paid out initial or renewal commission when advice is given they would be breaching those rules.

    I guess complying with the rules could be seen to be lame or are you are seriously advocating they breach the rules???

  11. Any alteration to a contract has to be agreed by all parties.
    Our agreements with providers are being alterred unilaterally without consultation.
    This is a breach of contract!
    They will get away with it as we never stand togetheras a group!

    anyone up for a class action?

  12. my comment @ 1022′ am

    please delete the second “not” (3rd line)

  13. I contacted Friends Life about increasing contributions to an old AXA plan, was told that if I gave no advice I would be paid under the original commission terms, if I gave advice I would get nothing.
    Client wants me to continue to advise on funds ongoing, so no choice but to transfer out, otherwise he has to pay me a fee out of taxed income. Not in the spirit of TCF.

  14. Excuse me while I beat a path to the doors of these product providers to support them and place my business with them….not.

    Could our beloved industry be any more nuts. I’m away to lie down so that someone can kick me…

  15. Disappointed Dave 10th March 2013 at 12:16 pm

    SL have done this to me (turn off renewal comm) on an existing contract. I asked them where in their TOB they were allowed to do this. They referred me to a clause within TOB (18.1) that they say allow them to do it, but the clause they are referring to, clearly states”any such variation will not affect contracts in force or proposals for contracts received by the company before such variation takes effect”.
    I fully intend to take SL to the small claims court to test whether what they are doing they are legally entitled to do so. I have seen nothing so far that suggests they are.
    I would encourage any IFA affected to do the same. The costs for the small claims court are low, and if SL receive a lot of them they may think twice.
    I wouldn’t mind so much if a) they were legally entitled to, or b) the client got the benefit of the non payment.
    It just another example of SL bashing the IFA sector, which they’ve been doing for almost 10 years now. I dont understand why IFA’s used them.

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