PlatformsSep 17 2013

Skandia will keep trail in place until ‘at least’ 2016

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Skandia will not cease paying trail commission on its bundled platform business until at least 2016, the company’s managing director has confirmed.

According to a statement by Skandia, trail commission is funded by the fund rebates that Skandia receives from fund groups.

The Financial Conduct Authority has set April 2016 as the deadline for platform service providers to retain these rebates, meaning that commission payments for products that fall under these rules will then cease.

However, only Isa and collective investment account products on the Skandia platform are affected by these rules, meaning pension and bond products are not.

Skandia will use the sunset period between now and April 2016 to give advisers time to manage the transition to its unbundled, fee based charging model. It will not move clients en masse without adviser or client permission and instead will give advisers full control of the process.

Last week, wrap platform Novia became the latest platform to announce its move to unbundled share classes, following in the footsteps of Ascentric and Alliance Trust.

Axa Elevate subsequently spoke out against bulk switching, warning it is not always the best thing for the customer and could lead to increased costs.

A survey of advisers using the Skandia platform in June revealed that almost two thirds were planning to move all their clients to adviser charging and stop taking trail on legacy business within 12 months.

Previously, FTAdviser sister publication Investment Adviser reported that the FCA had backed bulk switching, which could lead to platforms converting bundled, commission-paying share classes to unbundled versions without investors’ permission.

Peter Mann, managing director of Skandia UK, said: “The confirmation of our position gives advisers certainty more than two years ahead of the April 2016 deadline set by the FCA. Our aim has always been to find the optimal solution for advisers and their clients in light of the regulatory landscape and I believe we have done that.

“We anticipate that a very small percentage of our Isa and CIA business will be left in our bundled charging structure by 2016. That date is over two years away and it has never been our intention to expedite the movement of that book to an unbundled model before advisers are ready to do so.

“Importantly, our unbundled charging structure is already compliant with both the RDR rules and the new platform rules coming into effect in April 2014. Any business placed there today will not need to change in 2014 or 2016. In addition, we are now confirming that pension or bond business currently held in our bundled pricing structure will only need to move to our unbundled structure if advisers agree a natural disturbance event with their clients.”