The Financial Conduct Authority has confirmed it has no plans to alter guidance regarding trail commission on platform business, in response to adviser concern over legacy income arrangements in the wake of the regulator’s introduction of a ‘sunset clause’ for legacy rebates.
The FCA’s long-awaited platforms paper confirmed an expected ban on cash rebates from April 2014 and a surprise ban on legacy rebates following a two-year grace period in April 2016.
Following the paper’s publication, FTAdviser sister publication Investment Adviser reported that the ban on bundled rebate payments could spell the “death knell” for advisers’ legacy commission.
However, in an exclusive Q&A responding to questions from FTAdviser readers, to be published later today (14 May), David Geale, head of investment policy at the FCA and architect of the paper said the regulator has no intention of extending the legacy ban to passed on trail payment.
A reader had asked: “Does the FCA intend to abolish existing adviser trail commission on platform business by April 2016 in line with the ban on legacy rebates, or will platforms still be allowed to pay (“pass on”) trail on existing business?”
Mr Geale responded that the regulator expects trail to dwindle following its being banned under the Retail Distribution Review, but that it would not seek to introduce further rules to expedite this.
He said: “Pre-RDR, trail commission was a way that clients could pay for the initial advice charge and also for an ongoing service. We expect trail commission to decline over time, given that new advice... must be paid for through adviser charges.
“The guidance applies to both platform and non-platform business, and we do not intend to add to it at this time.”
Click here to read the full Q&A.
