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Urgent clarity needed on FSA’s trail stance

The FSA has been warned it must urgently address confusion over the future of trail commission payments.

Throughout the RDR consultation, the FSA pledged that trail commission brokered on pre-2013 business can continue to be paid and included this point in its final rules published in November last year.

But since the publication of its legacy assets consultation paper in November, there has been growing concern about the wording in the paper and the implications for trail commission.

The paper states trail can continue if it is “payable for advice provided pre-RDR”. Aegon and others suggest this could mean that if any post-RDR advice is given, all trail must cease. Trade bodies have raised questions about whether trail would be payable on a fund switch or switches within products.


Aifa director general Stephen Gay (pictured) says: “The FSA proposes that existing trail commission cannot be switched off but any further and additional payment for additional advice events must be charged transparently. However, the consultation document with its perimeter guidance is open to interpretation on this and it must be clarified beyond any doubt.”

Aegon head of regulatory strategy Steven Cameron says: “Aegon fully supports the RDR and adviser-charging for new business but imposing elements of this into existing products and adviser/client relationships will create detriment for customers, advisers and providers. Banning trail on post-RDR advice would need a proper cost-benefit analysis and should not be considered for the end of 2012.”

Threesixty head of business consultancy Phil Billingham says: “The FSA has picked bad words to start with, by with using ’legacy’ and ’trail’ and the definitions are causing the confusion.”

An FSA spokeswoman says its position on trail commission has been set out in the RDR rules and no clarification is required. However a feedback statement to the consultation paper is expected to set out a further range of advice scenarios to explain where trail commission would be payable.


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There are 14 comments at the moment, we would love to hear your opinion too.

  1. So thats all right then,Will someone please wake up the FSA
    and tell them there stance is confusing,unfair,illogical and arrogant.

  2. Monsieur Reynard 26th January 2012 at 9:23 am

    So despite other intelligent, informed industry professionals suggesting that the FSA’s position is unclear, the FSA remains adamant that its position does not require further clarification.

    Somebody needs to advise Mr Sants that clarity is in the eye of the beholder.

  3. Senior industry figures asking for clarification but the FSA says “no clarification is required”. Nuff said.

  4. The FSA statement just simply confirms what an arrogant bunch they are. The FSA are not regulators, they are a dictatorship. Practice what you preach FSA. Can you imagin what would happen if a client rang to clarify a point in a report and the client was told “no clarification is needed, the report is quite clear”

  5. How can the FSA spokesperson say no clarification is necessary when providers are clearly asking for help in trying to interpret the rules.

  6. Of course clarification is needed, and needed quickly. The FSA’s position is not clear and them saying that it is doesn’t help. As in many other aspects of the RDR, the lack of clarity here will cause problems for all parties in the future. Clearly the interpretation used by Aegon and others is correct this would cause cost as well as detriment to just about everyone involved. It would be very easy for the FSA to issue a statement now either confirming the Aegon interpretation or explaining what they actually mean.

  7. Perhaps we will need to use the service of translators as well as compliance people after 2012.
    It looks like the FSA do not actually know what they mean, hence the statement “no clarification is needed” They cannot clarify that which makes no sense.

  8. How can they provide clarification when they clearly don’t have a clue about what they’re doing?!! Sick of it all now!

  9. I think the main problem is that FSA staff don’t understand the problem so don’t know what to say.

  10. All the focus seems to be on old business and trail being turned off.

    What is the position for old business I’ve ‘inherited’ where the original adviser took initial, no ongoing, in the same vein that ongoing advice post RDR may stop trail commission, will providers allow product charges to be put in place on those but also all the business where currently no adviser charges are built in?

    ie why should trail stop but no product adviser charges be able to started too on old business post RDR?

    I’m still confused on this – can anyone clarify?

  11. The FSA have been clear that taril can continue – but they view trail as deferred intial. The confusion comes where trail is for ongoing advice – which post RDR must be adviser charging and so some people are saying that in these cases if you give advice on a pre RDR product you must charge a fee and stop the trail. Confusion reigns. In my view if the trail is being used as an ongoing service charge then this should just be used to offset anyadviser charge post RDR. If the trail is just deferred initaill than it shopuld continue in addition to any adviser charge levied. The important point is no new commission can be paid (including an increased amount of trail for any top ups)

    To PP: adviser charging can deducted from a pre RDR investment – it just depends on whether the provider chooses to facilitate it or not – some will not bother with the expense on some old products. Is that what you were asking?

  12. To John D.

    That’s sort of my question and yes I think it will come down to provider decisions on old business but if provider’s are having to alter old business to potentially have trail turned off post RDR, should they also not be allowing new adviser charges to be added?

    For example I set up a stakeholder for a client on nil commission 4 years ago, this has now grown to £400k with me doing lump sums/transfers all on 0% terms, amc of 0.3% – the client is happy to put on adviser charge of say 0.25% but provider says we can’t change the commission / adviser charge status from how it was set up initially with just £10k invested – post RDR why shouldn’t they/

    Or what about the £250k of bonds sold by a bank adviser where £20k initial was taken. I’m now the servicing IFA and the trustees would prefer to alter bonds to pay my ongoing review fees – providers all tell me I need to re-broke the bonds but again why should that need to done post RDR where old business can have trail turned off as we know but what about turning adviser charging on where currently it can’t be?

  13. As in other jurisdictions, regulators are licensed to create confusion and solicitors will need to be instructed to clarify and interpret the confusion, ultimately making the regulators less accountable and causing even more expense to those needing to be provided with clarity on rules.

    The fact that the FSA won’t answer questions proves that they do not want to take on the liabilty of the answer or advice. Its all a viscious circle!!!

  14. My message to the IFA community (AIFA?) is to pose as many different scenarios to the FSA as they can and get the FSA to agree what the treatment should be (e.g. if I top-up my client’s existing ISA, can I receive trail on…..etc.).

    It’s one of the issues with non-prescriptive rules in general, because everyone is scared to interpret them incorrectly. Why keep a simple system, when you can make it more complicated (for the clients too!).

    IFAs take heart though, because product providers are just as confused!!

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