Sun Life Financial out on a limb over post-RDR legacy trail
Most providers confirm they will not stop legacy payments, but Aegon says it is still considering details.
Sun Life Financial of Canada has risked incurring the wrath of advisers over a move to halt trail commission payments post-Retail Distribution Review, after a straw poll of advisers conducted by FTAdviser found most are planning to continue to facilitate such payments from 2013.
The firm has written to IFAs stating they are going to pay a single lump sum that they have calculated instead of paying them renewal commission in the post-Retail Distribution Review world.
Advisers confirmed to FTAdviser that they have received letters from Sun Life Financial of Canada stating this, but have expressed concern at the fact that the provider is not giving them an opportunity to review the lump sum payable.
A spokesperson for Sun Life said: “In line with the changes which will be introduced as part of the RDR, Sun Life Financial of Canada has undertaken a review of its closed book and in order to address these changes and achieve administrative simplification will be offering to settle its commission commitments, which would be payable post-RDR, in January 2013.
“We are simply offering to vary the contract by paying the current present value of future commission early, calculated over four and a half years.”
FTAdviser spoke to a number of other providers and found that most have pledged to continue to pay commission earned pre-RDR from 2013, though there are differences in terms of approach to specifics of plans.
A spokesperson for Prudential said that existing trail commission will stop only if an adviser ceases trading and has not transferred the product to another adviser, where there is a transfer to another adviser that does not commit to providing an ongoing service, or where a contract is surrendered.
Prudential said that some activities will have no impact on the continued payment of trail commission, including non-advised changes to a product such as switches and rebalancing, an automatic increase in premiums due to indexation and re-registration of platform assets.
Even where advice is given, Prudential said trail commission can continue to be paid when there is no change to the underlying product, a reduction in the level of regular premiums, a switch from accumulation units to income units or vice versa, or an ad hoc fund switch.
Prudential has informed advisers twice in its regular updates sent to advisers of its trail commission changes but has not sent out individual letters.
Aegon is the only firm that said it has not yet contacted advisers about its commission plans post-RDR, saying they are still being considered.
A spokesperson told FTAdviser that “in line with normal business experience”, it will provide a three-month commission quotation period, upon completion of the advice process, for individual pensions/drawdown and onshore investment bond business.