Clients vulnerable to the end of the platform sunset clause are still at the bottom of advisers’ to-do lists less than 24 hours before the deadline, industry figures have warned.
Tomorrow (6 April), the sunset clause comes to an end, which means advisers no longer receive commission for assets held on platforms.
Despite advisers being aware of the end-date for years, Mark Polson, principal at financial consultancy firm the Lang Cat said some advice firms – particularly those with limited business development resources – are still going to get a shock.
“We are concerned advisers will be wondering where their remuneration is.” Mark Polson“We are mildly concerned advisers who have not engaged in the process will be waking up and wondering where their remuneration is,” he said.
“I think it’s calm on the surface, but there will be advisers out there who are going to get a shock.”
Mr Polson said part of the problem is advisers are “flat out” running their business and have had to focus on the raft of regulatory changes.
He forecast the average size of a client account vulnerable to the end of the sunset clause is under £10,000, which for the most part is not business at the front of advisers’ minds.
But he said if you add all these client accounts together, “the impact is material for many”.
“I think we will see activity that is not immediately obvious, but a lot of advisers over the next year or so will realise they have to deal with those clients who are providing no remuneration.”
Sam Tonks, paraplanner at the TimeBank, said if advisers have left it this late then they are going to be in a bit of trouble.
“I think most platforms have done the conversion, but whether advisers have contacted their clients and agreed a new contract is another matter.
“If they have not assessed the impact on their business by now, they might get a shock when their commission statements come in after April.”
Ms Tonks said advisers who are still not prepared for the sunset deadline should access data from their platform to see which clients will be affected by the change, and know how much commission they will be losing.
Abraham Okusanya, principal at FinalytiQ, said, with nearly two years to prepare, “there shouldn’t be anyone who is shocked that this is happening.”
However, he said for advisers who have not prepared sufficiently, it’s “not the end of the world”.
“Worst case scenario is the trail income to advisers stops because clients would be forced into clean share classes, or all the money would be redirected back to the client.”
“The question is: is the adviser still interested in those clients? Because if they are they need to find a way of re-engaging with those clients and put then back on a fee proposition.”
“If they are not interested in those clients then it becomes, for the most part, a problem for the platforms to deal with the orphaned clients.”
But Mr Okusanya warned there could be a regulatory risk for advisers in the future, because the adviser has put the client in the investment proposition and failed then to formally disengage with them.
Platforms have also been engaged in large scale overhauls to prepare for the reforms.
Cofunds, one of the largest platforms, cut 30 jobs in light of regulatory changes, which included reshaping its IT systems ahead of the sunset deadline.
Stephen Wynne-Jones, head of marketing, said “We’ve been working with our intermediary clients for several years by supporting them in moving their clients from bundled charging arrangements to transparent pricing.”
Cofunds converted those that were left at the end of 2015, and Mr Wynne-Jones said the change has had a “net neutral impact on our business”.
The other two major fund supermarkets, FundsNetwork and Old Mutual, have also converted customer assets from bundled share classes to clean share classes at the end of last year.
A spokesperson for Old Mutual Wealth said the platform worked closely with advisers on a phased approach that “allowed them as much time as possible” to move clients to adviser fees.
Jon Everill, head of advisory services at FundsNetwork, said: “In theory the move from bundled share classes to clean share classes should create more simplicity for the industry but in reality there is unlikely to be any material impact on platforms.”
katherine.denham@ft.com
