There is now a requirement for intermediaries to be remunerated by an adviser charge which can be paid directly or facilitated through a product, with the ‘trail commission’ that was previously bundled into a variety of products now banned for new sales.
Trail commission that relates to products sold prior to the RDR implementation date of 1 January 2013 can continue, potentially indefinitely as the FCA has not set a formal end date. However, the end of all platform rebates on legacy business in April 2016 will effectively end much of this as investment firms move to unbundled models for both old and new business.
In any case, as soon as any new ‘advice event’ takes place on existing business the remuneration must shift to adviser charging, meaning legacy commission will wither in the longer term.
Adviser charges may be for initial advice, on-going advice or an ad-hoc service, but can only be levied in exchange for services provided to the client and they must be fully disclosed and agreed.
Charges can be ‘facilitated’ by a provider, as long as they come directly from the client’s premiums or funds. These payments cannot be paid “over a materially different time period, or on a materially different basis” to those relating directly to the advice.
This rule is designed to prevent providers or, in particular, vertically integrated firms, from obfuscating the cost of advice, or continuing to ‘bundle’ payments together.
There are also specific rules around disclosure of the costs. These include what, when and how the information has to be disclosed and will be explored later in this guide.
It is important to note adviser charging disclosure also requires a firm to disclose the nature of their service in terms of independent or restricted advice and an explanation of the nature of any restrictions.
