The FCA’s recent confirmation of a ban for platform rebates, which included the introduction of a sunset clause banning all legacy rebates by April 2016, had sparked speculation that trail would be finally ended by the regulator.
With this hanging over the industry like an Eastenders drumroll, it is interesting that a piece of research from Skandia estimates that almost two-thirds of advisers intend to move all their clients to an adviser charging model and stop taking trail on legacy business within the next 12 months.
As I mentioned last week, that certainly sounds like a sensible way to go. (Incidentally the one that always stands out for me was when, circa ’91, Clyde Tavernier became the prime suspect in Eddie Royle’s killing after picking up the murder weapon – doomf doomf indeed. Though, for anyone with a capacity for useless information, it’s Phil Mitchell who tops the poll for the Eastenders character with most cliff-hangers to his name, apparently notching up 206).
There has though, understandably, been a lot of kerfuffle on the matter (Trail, not Albert Square) with Lighthouse the latest to nail its colours to the mast in claiming advisers’ legacy trail should not be switched off as axing the payments rarely provides any benefit to clients.
Their line is that advisers have had to implement many changes as a result of the RDR and should be allowed to rely on historic trail to provide part of their recurring income. This may be true but I can’t help but think that working from this basis that trail will be scrapped ensures that advisers are fully protected if it does happen; and if it doesn’t then you’re in a far stronger position anyway.
It’s clear that advisers are taking control of their own destiny post-RDR and are actively taking steps to transition their clients from old commission structures to adviser charging. Findings from research across the industry certainly suggest that: adviser fees are likely to outweigh commission over the next year, customer understanding will increase and payment patterns will evolve (though Skandia’s survey also suggests that most clients still choose to pay the advice charge for on-going service through the product which is consistent with most research we’ve seen and carried out).
More change is coming and it would be foolish to ignore the signs, especially when the regulator’s intentions (if not specific plans) are so clearly spelt out. What’s certain is there’s more drama around the corner than Nick Cotton lurking into shot growling “Hello Ma.”
Extracts from IFA interviews…