View more on these topics

Regulator rejects churn claims over RDR top-up commission upheaval

The FSA has rejected industry concerns that its ban on legacy commission will lead to churning due to providers’ inability to switch off commission generated on top-ups to existing investments.

The regulator published its consultation paper on the treatment of legacy assets under the RDR last week. It confirmed that legacy commission, paid in cases where there are changes or additions to a product after the RDR, such as topping up a life policy or buying new units in a unit trust, will be banned.

Providers’ systems are currently set up to automatically generate commission on top-ups to existing investments. Concerns have been raised that if providers cannot turn off this commission they will stop taking top-ups on existing investments altogether.

Alternatively, providers could continue to accept top-ups but not change their pricing systems, meaning clients would effectively pay twice through adviser charging and commission factored into the price of the product.

Speaking to Money Marketing last week, FSA head of investment policy Peter Smith said: “I do not accept that providers will not be able to turn off commission on legacy products. They clearly all can because despite IT being complex, system changes are possible. Our view would be that they can switch off commission.”

Aifa policy analyst Jacqui Thornton says: “Our fear is this might lead to increased recycling in the market, particularly with regular premium products. Also if clients end up paying twice, through commission priced into the product and adviser charging, that cannot be good advice.”

Informed Choice managing director Martin Bamford says: “We have examples with providers where we or a previous adviser established pension products years ago. When we try to top those up, they cannot accept our new instruction for adviser-charging, they simply pay us whatever the original commission basis was. I cannot see providers being able to handle this with their current systems.”


Regulator to reassess legacy terms for non-advised business after RDR

The regulator says it will revisit the issue of whether non-advised business should continue to pay legacy commission if problems emerge as a result of the retail distribution review. In its consultation paper on the treatment of legacy assets, published last week, the FSA stated legacy commission where changes are made to existing products after […]

Potter: Equities are better value than bonds

Thames River multi-manager Gary Potter has warned investors to avoid jumping on the “bond bandwagon” and instead invest in equities. Speaking to Money Marketing at the Cofunds investment forum in Hertfordshire last week, Potter (pictured) said there is currently a perception that bonds are the only place to invest due to market volatility. He said: […]

Hoban says Rock sale is good deal all round

Treasury financial secretary Mark Hoban has rejected criticism from Labour over the £250m of Northern Rock’s capital base that is being put towards the purchase of the bank by Virgin Money. During a statement in Parliament this week, Shadow Treasury minister Chris Leslie raised concerns that using the capital to help finance the £747m deal […]

Nobody expects the Spanish Inquisition

Paul Fidell, Head of Business Development (Investments), writes about one of the primary challenges for those involved in estate planning. He looks at dealing with investment uncertainty in these low growth, low inflation but still volatile investment conditions. Protection of capital, to leave something for beneficiaries, is a fundamental objective of many people’s plans for […]


News and expert analysis straight to your inbox

Sign up


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

  1. Natalie, I think you will find that your interpretation is not wholly accurate. Crucially, last week’s FSA legacy assets consultation paper (CP11/26) proposes that if a legacy product is reviewed by an adviser and a recommendation is subsequently made to top-up the product then this will activate the article 53 PERG trigger, meaning that trail commission from that moment will be banned on the ENTIRE product, and not just on the top-up element, which is what many in the industry and yourself have assumed. The implications to the adviser community are significant.

  2. Well, this is what we think you should do and we don’t give a monkey’s about how much it’ll cost, so just get on with it and stop whingeing.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm