Skandia says the cost-benefit analysis of the legacy commission ban is fundamentally flawed and providers need a sunset clause as they will not be able to change their systems in time for the retail distribution review.
The FSA consultation on legacy assets, published last week, provides no specific cost estimates for the ban, saying costs were already factored in to previous benefit analyses.
In its March 2010 RDR policy statement, the FSA estimated the total compliance costs of the RDR to be between £1.4bn and £1.7bn over the first five years.
It estimated that one-off costs for providers to implement systems changes for adviser-charging will be between £330m and £385m. Ongoing costs were predicted to be between £70m and £85m.
The FSA says: “We do not consider the proposed guidance will give rise to incremental costs for firm. We have already estimated the costs and benefits associated with adviser-charging rules in earlier cost-benefit analyses.”
Skandia UK chief executive Peter Mann says: “The cost-benefit analysis used to inform the proposal to ban legacy commission is fundamentally flawed as the original consultation to which providers responded did not propose a ban.”
He says an outright ban will force the hand of product providers who do not have the time or resources to adapt their systems in time for the RDR.
He says: “This is likely to result in products being closed to new business and customers losing valuable benefits.”
Skandia says it will continue to push for a five-year sunset clause on legacy commission to allow it to be phased out gradually and give providers time to change their systems.
The Investment Management Association is also calling for a sunset clause to be introduced but wants this to apply to both trail and legacy commission.