The FSA is considering extending the ban on “kickback” payments made to advisers for referring clients to discretionary fund managers to pre-RDR business.
The regulator set out plans in October to ban DFM payments to advisers where clients are referred to a DFM and provided with a personal product recommendation. The ban was initially applied to referrals set up after 31 December, but the regulator is considering extending this to pre-RDR business.
It has also previously consulted on extending the ban where advisers do not provide a personal recommendation but maintain an ongoing client relationship.
In a briefing note sent to trade bodies last month, the FSA outlined four options for legacy DFM referrals – switch off all referral payments following a transitional period; allow payments for pre-RDR referrals but ban them for post-RDR referrals; permit referral payments to continue on original investments but turn them off following fund switches; and allow payments for pre-RDR referrals but reduce the level of payments for post-RDR recommendations to pay more in to DFM-held investments.
The regulator will publish a consultation on DFM payments later this year.
Page Russell director Tim Page says: “It seems to me it would be simpler to switch off DFM referral payments following fund switches, echoing the position on trail commission.”