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Openwork director urges FCA to review trail commission rules

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Openwork marketing and propositions director Philip Martin wants the FCA to review rules which prevent advisers retaining trail commission on non-life products after completing a fund switch.

Under RDR rules, advisers are allowed to retain trail commission if they complete a fund switch in a life company product. However, this is not the case for non-life products such as Isas or general accounts.

Martin says the rule is an “anomaly” and urges the FCA to review its approach to legacy payments to advisers.

He says: “If you give advice to change a fund within anything other than a life company product then trail is switched off. So if you do a fund switch within a life company’s pension it is not a problem, but if you do it within an Isa or a general account that is paying commission then trail is switched off.

“It makes no sense that different tax wrappers are treated in different ways and we think the FCA needs to look again at that issue. Ideally, trail would remain across all product types, but the bigger issue is achieving consistency.”

Martin also wants the FCA to revisit its approach to advised top-ups.

He says: “If a customer decides they want to top-up with advice then it has to go through adviser charging. But if they do it themselves trail commission could still be paid, which again is totally anomalous.

“The problem is you are going to see a trend towards non-advised in order to retain trail.”

An FCA spokeswoman says: “We are monitoring how the market evolves following the introduction of the new rules and will formally review whether the rules are working in the way we expected as part of our post-implementation review next year.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Got to agree with the fund switching. At a recent review meeting we agreed with a client to rebalance the fund back to its original asset allocation as we have done for the last 5 years

    There was a total of 6 pieces of paperwork all with masses of small print and signitures required! The client looked at me as if I was from mars.

    You really could not make up idiotic rules like this.

  2. What a mess these know-nothings have created.

    Yesterday I received £833 for a piece of incremental business that I did not advise on or have anything to do with.

    The week before I advised a client and not only did I not receive anything from the product provider but I also lost my previous trail fortune of £0.26 p.m.

    I once read a science fiction book where everything was the opposite of hw it was supposed to be. Sounds like the mad world I inhabit now.

  3. Completely agree. Non advised will explode and client portfolios will mysteriously not change at all for years and years to come. Total madhouse material.

  4. “…will formally review whether the rules are working in the way we expected…”

    Technical discourses on how the rules would work in practice were well publicised by the FSA. The situation described in this article is therefore no surprise, let alone news.

    What would be nice to know is what the expectations were that we had to live up to. I suspect they didn’t dovetail too well with the rules designed to make them happen…

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