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Lighthouse chief says trail should be left alone

Malcolm Streatfield

Lighthouse says advisers’ legacy trail should not be switched off as axing the payments rarely provides any benefit to clients. 

Chief executive Malcolm Streatfield says advisers have had to implement many changes as a result of the RDR and should be allowed to rely on historic trail to provide part of their recurring income.

Streatfield says: “Advisers have had to make a huge amount of changes over the last couple of years and we need a period to allow that to bed down.

“Lots of businesses have acquired policies that come with recurring trail and I see no reason why that should be disturbed. Providers that think they can turn it off at a defined date will incur the significant angst of the adviser population.

“If that payment is cut off where does it go? It rarely gets passed back to the client so it should just be left alone.”

Barretts Financial Solutions senior partner Kim Barrett says: “The industry needs to realise the regulator is going to switch trail off and it will happen quicker than a lot of advisers expect.”

For our full interview with Malcolm Streatfield click here



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There are 9 comments at the moment, we would love to hear your opinion too.

  1. Absolutely agree but I am afraid the fair IFAs will be hit for the sins of those who took huge commissions. If we lose any trail in respect of a client, we simply invoice them more and this only works out fair to both parties if the provider passes on the full benefit of switching of the trail to the client. I would question whether the providers systems or the inclination is there.

  2. What happens for those clients who have bonds done directly with insurance companies in trust for IHT purposes and for whom it could be catestrophic to rewrite the bond under RDR friendly bond? What about those who would be hit with income tax charge if the cashed the bond in now to repalce with RDR friendly one? How is this in a clients interest? Or what about the pension which is done with a company who is not on a platform – I am thinking specifically about those few who offer guaranteed plans? For Unit trusts and ISA’s etc on platforms where there is no actual encashments plus it will make the client at least as well off as pre- reg but the has to be some common sense applied to this general statement of “trail must go on all legacy plans”

  3. Nicholas Pleasure 21st June 2013 at 10:00 am

    It’s rare that I agree with someone from Lighthouse but today is a first.

    As the comments above have shown, in trying to regulate 100% fairness, they are actually removing money from advisers who may well use it to service clients and giving it to the providers who won’t.

    Pointless, unfair and the client will ultimately lose, when their adviser goes out of business or when he presents them with an invoice for the missing trail.

    With the benefit of hindsight we should all have written our business at 6% no trail rather than 3%+0.5%. But most of us were stupid enough to do what we thought was fair and just for our clients and in line with what the regulator wanted.

    Now we know that the regulator is unfair, fickle and we should make as much money as we possibly can from our clients in as shorter amount of time.

  4. I find this very frustrating as it wasn’t all that many years ago that advisers were criticised for taking large up from payments and so I hazard a guess that the majority elected to take a lower up front payment with the trail paying towards the ongoing reviews etc.

    Those who did this are now being penalised for considering their clients. You just can’t win!!!

  5. Insurance Companies Profit 21st June 2013 at 10:36 am

    What about the insurance companies who like the Prudential who have turned off the top up commission on legacy Prudence Bonds, but have not improved the terms for the clients, client get a bill from the adviser but the Prudential retains the original charging structure and keeps what it would have paid in commission. Or Skandia who turns off the commission contract increments to Whole of Life plans but again does not improve the client terms. We have no issue with invoicing clients for work and not receiving commission but would expect the client to receive improved terms from the provider. Not be given the “its legacy business we cant change the contract” excuse

  6. The FSA once said that it would not retrospectively legislate but this is exactly what they are planning here.

    The FCA has no business voiding the commercial relationships previously entered into.

    With hindsight we all should have taken the money and run, rather than do what we felt as best for the client.

    Had many of this practised such since 1988 then we’d all be sitting pretty offshore and laughing at the fiasco this industry has descended into.

  7. State interference on a grand scale.
    If trail is lost the client will pay twice. I for one will not be working for free, while the provider sits in his counting house counting out the money.
    The FSA/FCA have no commercial sense and live off OPM so we can expect them to make even more stupid decisions.

  8. I wonder if this should be tested in court given that it is probably a contract law issue.

    I cannot see how a Regulator can in isolation effectively void an existing legal contract.

  9. Julian Stevens 21st June 2013 at 6:47 pm

    We await news of APFA’s representations to the FCA on this issue, which seems to be pointlessly vindictive.

    It’s hard to see how clients will be anything other than disadvantaged because any review of legacy business (and most of it should be reviewed from time to time) will result in a separate charge. And, as others have asked, who will get the trail after the date on which it’s switched off? Given that most life offices cannot or will not re-jig their systems so that the trail can be folded back into the policy, they’ll just keep it for themselves. How is that supposed to be TCF? Another sacrifice on the altar of idealism.

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