Standard Life believes the FSA’s final rules on trail commission have doubled the average length of time that trail is expected to continue after the RDR to up to eight years.
The regulator published a policy statement on the treatment of legacy assets in February. The statement said where top-ups are paid into a product, trail can continue to be paid on the pre-RDR investment amount but not on the new investment amount. Trail can also continue where advice is given that leads to no change to the product, on automatic contribution increases or rebalancing and fund switches within a life policy.
Speaking at a Money Marketing RDR invitational event in London last week, Standard Life regional manager Neil Denton said the latest paper allows advisers more planning time as trail will be able to continue for an average of six to eight years.
He said: “The recent legacy paper is a positive thing for advisers. The trail commission advisers are receiving at the moment is likely to last over a longer period of time. We have done some modelling which suggests that before the most recent paper, ongoing trail commission would have significantly decreased in three to four years. Now it looks like it could be double that period of time.”
The industry had been concerned that based on the wording of the last consultation paper in November, any post-RDR advice on existing products would have ended all trail payments.
Aifa policy director Chris Hannant says: “It is certainly welcome that we have greater clarity on the circumstances under which trail will end. There is a common understanding that trail is likely to go on longer than had been envisaged previously.”