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Tale of trail


I have noted confusion in the trade press about trail commission and would like to draw attention to three points which the FSA app-ears not to have considered:

1: Mathematically, trail commission is achieved at least on investment bonds and pensions by a reduction in initial commission, that is therefore the original IFA’s entitlement and is that company’s asset to dispose of as it sees fit.

2: My firm explains trail to clients as being for the provision of ongoing services such as valuations and reviews. That service would have to be provided by the new IFA or the client would not be staying with the new IFA, having previously received the service.

3: The tax position of the client appears not to have been addressed. Rebates on bonds presumably will be treated as withdrawals and couldn produce chargeable events. Similarly, Oeics would produce dividends or interest? Both would be tax-able. Payments from uncry-stallised pensions would be inappropriate benefits and could therefore jeopardise the tax status of the scheme. USPs could result in a 55 per cent unauthorised payment charge. The situation with regard to a trust holding bonds so that they are non-income producing and therefore having to produce accounts is just too horren-dous to even consider.

Robin Hunter
Hunter & Co, Sutton Coldfield


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