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Most firms expect FSA to ban execution-only commission

More than half of pension providers and fund supermarkets expect the FSA to ban commission payments on execution-only business after the retail distribution review, research by Dunstan Thomas suggests.

Under the RDR, IFAs will need to charge clients a fee for advice rather than commission. The regulatory changes do not affect non-advised product sales.

A survey of 34 retirement product and providers shows 55 per cent believe execution-only business will not be allowed to continue to attract commission payments in the long-term.

Dunstan Thomas chief executive Chris Read says: “This uncertainty is a serious problem for companies trying to plan for the RDR.”

Bestinvest senior investment adviser Adrian Lowcock says: “I expect the FSA will look to remove commission on execution-only payments. This would make it easier for clients to compare charges across the market.”

Around one-quarter of the firms surveyed cite uncertainty about whether cash rebates will be payable from fund managers via platforms to client cash accounts as the biggest concern.

Uncertainty as to whether the EU’s packaged retail investment product regulations, which focus on investment information, will run counter to disclosure changes required by the RDR was the biggest concern for 18 per cent of respondents.

Nine per cent remain unsure if it will be up to the adviser or the provider to check if business is execution-only or advised.

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Comments

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

  1. Julian Stevens 21st May 2012 at 10:05 am

    Given that true execution only is a situation whereby:-

    1. the client knows clearly what s/he wants to do,

    2. is sufficiently well informed to have reached that determination and

    3. all s/he wants is to use your agency to place an item of business that the provider won’t accept direct,

    I must say that I’d be broadly in agreement with a rule banning commission on EO transactions.

    We’ve only ever had two approaches to undertake EO transactions and I turned both away. One was from a barrister in his early 50’s who wanted to vest his pension funds to buy an enhanced annuity, but the minimum vesting age was shortly to rise to 55 so it would have been a rushed job and I knew he’d screw us as hard as he could on the commission. The other was from a teacher (oh, God!) who wanted to surrender her PP’s and transfer the proceeds into the Teachers’ SS for added years, so I turned her down as well.

    It would only take one question such as “D’you think this is the best thing to do?” and, before you know it, you may well have stepped into the territory of advice for which you can be held accountable (indefinitely!) Best to avoid such a situation.

  2. Am i missing the point here? As stated above the RDR does not cover non advised sales, a ban on xo commission would not he as part of this. So where does this view stem from?

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