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Dear Pat: Trail commission really will go after April 2016

Advisers need to start preparing for the end of trail commission in 2016 and adjusting how they get paid for existing business, says Platforum head of adviser relations Emma Napier

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Another month has galloped past and in the aftermath of the RDR things seem to be settling down somewhat .

This is what I’m currently hearing from advisers: “I am now concentrating on seeing my clients after spending so much time on process documents and sales propositions last year.”

Lots of advisers tell me they are re-evaluating their client banks after an initial sort out (maybe to tick the ‘RDR done’ box?), which has seen a natural adjustment in client segmentation.

The providers all got quite excited about segmentation in the run-up to the RDR because (I think) they were convinced advisers would want that standard template that would satisfy the FCA’s requirements. Many advisers tell me they actually did lean on providers to help in the early stages – one told me “my platform provider came in and has almost written our sales process and they are helping us segment our clients too”.

Since then the feedback from firms having had a chance to sense-check new ways of working with clients is, “some of my low value clients I thought would want the bronze service have requested the gold. Reasons are peace of mind and the knowledge I am on hand every three months to review matters face to face. They value this service from me and are prepared to pay for it.”

Just when things start to settle down the regulator publishes its final policy statement on platform rebates – nothing really surprising. Have you read our Idiots Guide? It’s a less wordy snapshot of the groovy stuff, and can be downloaded free from our website.

I think the most interesting point of note in this paper is the sunset clause on legacy business. We have been inundated with advisers queries on what this means i.e. “Does it really mean no trail?” and “What about bond investments set up on a trail payment basis?”

Seriously, after April 2016, it will be no more. I wouldn’t mind betting some providers will be better than others in working with advisers to readjust ongoing servicing payments to adviser charging. Watch out for the ’switch off‘ and start planning now to protect this business.

The whole mantra coming from the FCA is fair consumer outcomes, so it will want to see clients written to with options for fair, honest service solutions with explicit and transparent costs. I think we are going to see a different world in how we deliver advice to clients in the next few years. Is this a good thing? Discuss.

Last month Holly Mackay and I went on the road for the first stint of our 2013 Adviser Roadshows covering London, Southampton, Bristol and Birmingham. Having the FCA in the house encouraged lots of interest and we received some excellent feedback.

FCA product specialist Rory Percival spoke very openly and frankly about the new FCA culture and gave a little insight into what might be worth a second look for advisers. One thing that he said that stuck in my mind was on TCF when he said: “TCF hasn’t gone away and expect it to be back on the agenda.”

pat

Personally I welcome the upcoming FCA’s thematic reviews, which will no doubt lead to some naming and shaming.

I think this is a really encouraging approach to how to regulate our industry – i.e. by being pragmatic and realistic. The way they do this is by issuing the results with some blurb around what they found and then some really helpful examples of what is deemed good and bad practice. Watch out for the first one but my guess is platforms/ due diligence/ adviser monitoring (KPIs) and CIPs might be on that radar.

 “It aint all plain sailing”

Platforms are still going through the mill with Cofunds’ departure lounge filling up – MD, Alastair Conway, followed by operations director Stephen Mohan, marketing director Verona Smith and the current CEO Martin Davis all out.

I guess naturally L&G will want to make its mark and set some new parameters but from what I hear from advisers we will see the demise of what was formally Cofunds “the daddy” sooner than expected.

Due diligence?

Platform due diligence is still the hottest topic for me and every day I talk to advisers who tell me they are nervous about picking the right one.

Typical questions include, What makes a good platform? Will that provider be around in the future in the same guise? What is the actual cost? Do I need all the bells and whistles or just the basics? What sort of clients would be best suited to a platform at all? Do I need access to DFMs and can they access my clients on platform? What’s the reporting like? And How confident am I if something goes wrong and I need help?

Sound familiar? These quite rightly need some thinking about, and without meaning to sound all TCF-y, it depends on your clients and your business – simple as that.

Just make sure you ask yourselves the questions beforehand of your own client service promises. “Do I need Christian Laboutins when I’m just walking the dog?”

Transact Parmenion
Congratulations to Transact for slipping into first place in this quarter’s pPlatforum Market Monitor. The effects of the recent price reductions as well as consistently great service see this platform enjoying the top spot once again.

Parmenion wins the adviser choice laurel this quarter with their advisers reporting great feedback on usability.

More information as ever on our website, or simply pick up the phone/send me an email – we don’t charge, and give a bones ‘n’ all view!

Emma Napier is head of adviser relations at Platforum

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. So from 2016 what was classed trail commission will now, assuming all providers facilitate it, be treated an adviser fee with all the tax implications this might raise – great consumer outcome eh!

  2. I see this type of commentary as a bit of mischievous scaremongering and maybe am doing the matter a dis-service by commenting and bringing further attention to it.

    Some renewal commission is contractual (certain bond business) and some is not (i.e. it is not in place of any initial commission/remuneration ‘re-structuring’ arrangement), such as ISAs’ and collectives.

    We have been told that this is not an issue by mainstream providers and so it would seem entirely reasonable to control the controllable and accept this position until they say differently.

    If people wish to put forward the view that renewal income is at risk (apart from via defunct providers and the odd opportunist), then so be it. But we must ask ourselves, why would they do this?

    To consider ‘re-positioning’ one’s firm and client assets in case of a change to trail income, given that you already service those clients and presumably warrant remuneration, would be to say the least, a rather rash and somewhat incomprehensible way to run your business!

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