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Skandia axes trail on fund that ‘should never have been paid’

Skandia has scrapped trail commission on the Somerset Emerging Markets Dividend Growth fund, saying the trail should never have been paid.

The platform wrote to 5,000 advised clients invested in the £403m fund to inform them their adviser would no longer be receiving trail commission of 35 basis points with effect from 29 November.

The letter, seen by Money Marketing, states: “I am writing to you because your are an investor in the Somerset Emerging Markets Dividend Growth fund and you have an arrangement with your financial adviser to pay ongoing commission (known as nominated trail commission).

“The nominated trail commission your adviser receives is partly paid for by the fund trail commission from the fund manager. Therefore, if the percentage nominated trail commission you have agreed to pay your adviser is greater than the new rate of fund trail commission, we will have to sell more units from your investment each month to pay your adviser.

“You do not need to take any action unless you wish to make an alternative choice form our extensive range of funds.”

Skandia says the decision to remove trail on the fund was because an “incorrect fund based commission rate” was set up when the fund launched on the platform, It says the trail should never have been paid.

A spokesman says: “The Somerset Emerging Markets Dividend Growth fund launched on 9 July 2012 and was set up with an incorrect fund based commission rate of 0.35 per cent. It should have been 0 per cent.

“We have contacted advisers with clients invested in the fund to make them aware of the change. We will not be seeking to reclaim the commission and apologise for any inconvenience this may have caused.”

Skandia says it has paid a total of £10,000 in trail since the Somerset fund launched on the platform.

Somerset delined to comment. 

Skandia made a similar move to reduce trail on bond funds from Invesco and M&G earlier this year. It reduced trail by 10bps, saying it brought the payment in line with other platforms.

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