FSA data reveal pre-RDR jump in sale of commission products

Financial Services Authority data based on figures supplied by product providers reveal an increase in advised sales of retail investment products that pay recurring trail commission ahead of the Retail Distribution Review, according to a statistical release issued today (31 August).

While FSA data show an increase in such sales, the report does not state by how much sales had increased.

The regulator also pointed out an increase in the proportion of bonds sold with advice from life insurers, which rose from 24 per cent to 40 per cent.

The FSA said: “Investment bonds sold by insurers act as ‘wrappers’ for other products, and a quirk in the rules means that they will continue to pay commission after the RDR is implemented.

“There is a concern that some advisers will exploit loopholes in the RDR to continue to earn commission.”

Meanwhile, the number of retail investment products sold on an advised basis has dropped by seven percentage points in 2011/12 compared to the previous year, data from the Financial Services Authority indicate.

Most retail investment products, which include pensions and life insurance policies, are still sold on an advised basis, with this segment account for 60 per cent of all sales in the 2011-2012 financial year. However, this is down from 67 per cent in 2010-2011.

The percentage of occupational pension scheme sold via advice fell by half, from 26 per cent to 13 per cent this year, while those for personal pensions fell from 64 to 60 per cent.

Advised sales for Isas fell from 87 per cent to 80 per cent and those for trusts and Oeics fell from 61 per cent to 53 per cent.

Sales in investment trusts fell 70 per cent year-on-year, from 1,493 sales in the first quarter of 2012 compared to 4,965 in Q1 2011. However, records show a dramatic drop-off between Q1 2011 and Q2 2011, when there were 1,762 sales.