Fidelity is taking a stand against brokers which rebate trail commission and annual management fees to the client, in what it describes as a bid to protect the smaller IFAs.
The company has targeted two firms, Chartwell and Com share, which it has highlighted as the biggest perpetrators of renewal commission rebating.
In a recent letter to the two brokers, Fidelity said it will no longer permit them to sell its products if they continue with their policy of rebating trails.
Fidelity said it was concerned that if trail rebates became the norm, many smaller IFAs would be forced to follow suit and risk going out of business.
But Chartwell says it feels it should have the right to rebate commission for those clients which do not continue to take advice after their original purchase.
Chief executive Craig Wetton insists rebating trail is not intended to damage other IFAs but to give clients more choice.
He says: “There is a fairly heavyweight campaign by the big discount brokers, who rebate all initial commission and rely on trail. Fidelity has caved into this pressure and now it has blown up in its face.”
Fidelity marketing director David Cowdell says: “We passionately believe in a healthy IFA community built on economic fundamentals. Trail commission is a fee which we put aside to pay advisers, not consumers, for their service.”
Wentworth Rose managing director Philip Rose says: “This is excellent news for advisory IFAs. Commission levels are being attacked as not being earnt. We should defend pro-per remuneration and product providers should act to prevent any improper use of these payments.”
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