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Skandia will pay trail commission until 2016

Skandia says it will continue to pay trail commission on past business through its platform until the FCA implements its ban on legacy payments between fund managers and platforms in April 2016.   

The firm says it opposes moves by other platforms to end trail commission on legacy business before the April 2016 deadline set by the FCA.

Standard Life announced in August it would bulk switch all investments into clean share classes in November, a move which will end trail associated with the assets. 

Skandia platform marketing manager Michael Barrett argues switching off trail so soon could hit adviser’s revenues without giving them sufficient time to agree suitable charging models.

He says: “We want to give clarity to advisers on revenue streams. The adviser gave us the business so it is up to them to turn off trail in the future. It is not up to the provider to make the decision. There is always the temptation to look at terms and conditions and see what can be done but there is a more serious issue around treating customers fairly.”

Skandia will transfer its legacy book of Isa and Collective Investment Account business to an unbundled model by switching clients as and when an event triggers trail to be switched off, such as advice that leads to change in the product and top-ups where no commission is allowed on the new investment.

Bonds and retirement products are not affected by the FCA’s rules on legacy payments as they are administered by Skandia’s life company Skandia  Multifunds. The FCA is considering whether to extend the rules to Sipp providers and life companies.

Skandia UK managing director Peter Mann says: “We anticipate a very small percentage of our Isa and CIA business will be left in our bundled charging structure by 2016. That date is over two years away and it has never been our intention to expediate the movement of that book to an unbundled model before advisers are ready to do so.

“Importantly, our unbundled charging structure is already compliant with both the RDR rules and the new platform rules comping into effect in April 2014. Any business placed there will not need to change in 2014 or 2016.”

Following the FCA’s decision to ban legacy payments between fund managers and payments in April, experts have been warning advisers to factor in the end of historic trail commission related to platform business. 

In June, Skandia cut the level of trail commission paid to advisers on four bonds from 0.35 per cent to 0.25 per cent, claiming the current level of trail is unsustainable.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Turing off trail MUST result in the FOS being forced to respect the Longstop. If the client changes adviser and hence trail is paid to a different firm, then there is a clear change of responsibility for ongoing suitability of the product, so clearly a line can be drawn for end of responsibility for ongoing suitability and hence liability. If the FCA or even worse, the provider chooses to turn of trail, then as the adviser is NOT being paid to maintain files let alone PI cover, responsibility will lie between the provider, the FCA and the client themselves.

  2. Whatever way you look at this issue, it’s a disgrace. I can’t understand why there has not been more objection to the removal of trail or fund based commission. We have all got to justify again what we are doing for clients. I am sure our firm will manage that as we are providing clients with ongoing services but it does provide people with a possible excuse to renege on a previous agreement. We always embraced the principle of reduced initial commission followed by fund based commission. So we sacrificed a large up front sum of money to add value to our business. This was actively encouraged by the FSA and now the same people under a different title want to take it away. A lot of IFAs are in the same position having taken the FSA at their word. The situation is utterly shameful and I look forward to my next meeting with the FCA so I can express that view forcefully and directly. It’s the old story. Those of us playing the game are paying for those who don’t!

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