View more on these topics

The end of the local

We are due this year for a shake-up of epic proportions. After the RDR, legacy commission (that is, automatic indexations regular-premium renewal commission, level and trail commission) can still be transferred en bloc but if the servicing adviser gives advice on the legacy product they would not be entitled to receive this commission.

What does this mean in practice? If fully implemented, advising on the legacy product would result in commission being switched off whereas if the adviser had not provided the advice he could continue to receive the commission.

If this is introduced in what appears to be its current form, I see enormous problems ahead as this would mean that even a small inquiry from a client which could easily be answered over the phone, would cost the IFA their commission.

Other problems are already emerging as many product providers do not have the systems to deal with such changes on individual policies.

After the RDR, where customer-agreed charging replaces traditional commission, remuneration will be a matter decided between the adviser and the client. There will, in theory at least, be no such thing as passive income for investment advice after the RDR as a specific remuneration and a service agreement will need to be made between the adviser and the client which the product provider will simply facilitate.

As customer-agreed remuneration is between the client and the adviser, bloc transfers of agencies will, as far as I can see, not be possible and will require the consent of every client individually.

There is a great deal of clarification required and a lot of practical problems ahead which will require a fundamentally different type of IFA.

The days will soon be gone of the local IFA that a client could call for a bit of a chat about his old pension policy and that endowment he took out 20 years ago. Instead, there will be an IFA which is run as a business with better financial and other resources.

Transactional IFAs are dead in the water and the banks will be left to deal with the small clients. Combine all this with the worrying state of the economy and we have a recipe for a much reduced IFA sector this time next year.

Sheriar Bradbury is managing director of Bradbury Hamilton

Recommended

Fund managers split over executive pay crackdown

Fund managers are divided over whether introducing legislation to curb executive pay could lead to a drain of talented employees away from UK firms. The Government is preparing new legislation aimed at addressing excessive pay which is likely to include introducing binding shareholder votes on executive pay packages. Artemis UK special situations manager Derek Stuart […]

Rathbones’ Coombs slams “cosy club” of investment trust boards

Rathbones head of multi-asset David Coombs has criticised the over-representation of asset managers on investment trust boards, claiming that it detracts from their independence. Coombs (pictured) believes wealth managers should have greater representation on the boards of investment trusts. He says: “In many cases, non-executive directors are drawn from the asset management community, the sellers, […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com