The FSA has warned it is watching for IFAs seeking to maximise their trail commission by churning business before the RDR deadline or discouraging clients from moving investments that generate trail after the RDR.
The FSA’s response to the Treasury select committee’s RDR report, published last week, says the regulator is concerned about possible consumer detriment as a result of firms trying to maximise their commission income.
It says: “We are undertaking thematic supervisory work this year to identify those firms who we believe are engaging in this activity and we will take action where we find evidence of poor behaviour.”
The FSA also says it recognises there is a risk that advisers may discourage clients from moving investments after the RDR where there is an ongoing income stream.
The response says: “We will be closely monitoring this as part of our ongoing supervisory work and we will take action where we find evidence of unsuitable advice.”
The TSC’s report, published in July, called on the FSA to “use all available tools” to search for pre-implementation churn or post-implementation holding where it is not the best solution for the client. The committee says it wants to see the regulator’s findings.
In March, the regulator confirmed that trail commission will be allowed to continue for contracts brokered before the RDR deadline on December 31, 2012.