It will hurt, but trail commission ban won’t be a knockout

As Investec notes, the sun will actually start dipping below the horizon by the end of this year, when top-ups can no longer attract trail.

But it says four in five intermediaries believe some of their peers will struggle to complete the transition by the final 2016 deadline.

Probably the most worrying statistic from the survey suggests that some advisers have moved just a quarter of their trail-based income to fees and 28 per cent still have half to transfer.

Now, clearly the people at IW&I have a little bit of an agenda.

They would love IFAs to move the money to the discretionary fund manager with nice, shiny and clear client agreements and no trail worries.

Having said that, though, they are still correct to raise the issue.

Some advisers are definitely still in the middle of transitioning their back books.

Actually, most of the IFAs I regularly speak to say they have already moved just about everything. Trail-paying retail back books must be a swiftly diminishing asset anyway.

Yet should we be so fearful about the prospects for advisers?

The removal of trail surely isn’t such a gap to bridge

For one thing, most advisers will have coped with a move away from upfront commission, despite warnings that the first stage of the RDR would be a near-extinction event.

This simply hasn’t been the case, disproving those calculations that predicted advisers collectively would lose billions in upfront payments.

Clearly advisers were already on the way to making the move away from upfront commission, while clients appreciated the value of advice much more than many market commentators thought.

The removal of trail surely isn’t such a gap to bridge, given that adviser charging facilitates payments that look like trail.

This survey is not discussing hourly fee work. While firms working on this model seem to be on the increase, it is not what the regulations will be demanding.

So, perhaps the real trail blow will be the loss of regular income from less active clients.

I wouldn’t want to be glib about any move that impacts on advisers’ bottom line significantly. But there are very clear opportunities to earn more fee income.

I’m talking first about the fees from auto-enrolment and second – and probably much more significantly – from the retirement income reforms that look set to boost advisers’ income levels significantly.

I’m going to stick my neck out and say I’m reasonably optimistic that this hurdle can be crossed, certainly by retail-focused investment advisers, and that IFA numbers will – hopefully – stay where they are or even increase.

Any loss of income to an adviser’s practice must be a blow, but I just can’t see it as a knockout blow for many.

John Lappin blogs about industry issues at www.themoneydebate.co.uk