The Financial Services Authority’s policy statement on legacy commission is finally here and makes it very clear where everyone stands, according to Legal & General’s Danny Wynn. Mr Wynn talks to Financial Adviser about the Suffolk Life pension range, as part of the L&G proposition that’s leading the integration into working with platforms.
It may have taken a while to be published, but the regulator’s decision to make its stance on legacy and trail commission crystal clear can only be good news for the industry, according to Danny Wynn, director, platforms and policy at Legal & General.
“The final result will be a relief to many as it’s a lot better than everyone believed and there doesn’t appear to be much in the way of grey areas left,” he says. “We felt that some of the proposals in the original consultation were unworkable and inconsistent with our understanding of what constituted a product.”
The policy statement also highlights the disparity of the treatment of legacy commission between insured products and trust based arrangements, such as SIPPs and ISAs. It means that advisers must take extra special care in terms of the latter as far as picking appropriate products is concerned.
The key question that will be asked by advisers is whether the new arrangements will enable them to deliver the same level of service to clients that they have come to expect over the last few years, suggests Mr Wynn. It’s an issue that certainly needs to be tackled.
“It has received a lot less attention but the FSA has also released guidance consultation in relation to independent, unrestricted advice,” he says. “It has laid out clearly what it expects from firms that wish to trade as independent and such clarity should be welcomed.”
“One of the points on which they’ve taken an unequivocal stance is on stating that firms wishing to trade as independent will find it almost impossible to do so if they only use one platform”. Therefore the onus is on advisers to monitor the development of platforms and pay close attention to issues such as the barriers to exit and how they can move clients’ assets between platforms.
“One way of initially managing that risk is by looking at products and tax wrappers that can support multiple platforms,” he says. “Even if the adviser is recommending to a client that they switch platforms they don’t have to recommend new products.”
Suffolk Life has been quick to respond to the changing dynamics of the industry and is now in an enviable position of being able to offer a range that suits everyone from individual advisers to those using discretionary fund management services, and model portfolios.
A prime example is last year’s introduction of SmartSIPP. “It was a strategic response to the recognition that advisers want to manage assets on platforms but understand the risks associated when they want to move between platforms,” he explains. “Then there is the wide coverage of our more established MasterSIPP product for which we have extended the platform coverage.”
It means that not only can Suffolk Life support advisers switching between platforms to get different inves tment propositions; it can also move clients moving between its products, which obviously go from a quite basic SIPP offering all the way to the functionality of the MasterSIPP.
“This enables the client to move up when they need that functionality instead of having to pay the expense upfront before it’s required,” says Mr Wynn. “The key benefit of our offering is the flexibility it provides.”
Suffolk Life also has a product for firms offering discretionary management services. “This type of outsourcing does appear to be a trend that’s underway and we have a product that’s very efficient in that space called the Single Investment Manager (SIM) SIPP,” he says. “It’s incredibly transparent and allows a DFM to operate and run a portfolio within the wrapper as simply as it is possible to do.”
Generally, Mr Wynn has noticed that firms are starting to segment their client bank and picking different platforms for their clients in a more structured way. Interestingly, these decisions are no longer being made solely on the basis of wealth.
“It’s often in terms of how complex the financial situation is of a certain client,” he explains. “Just because they have money doesn’t mean they automatically need to be on all-singing, all-dancing platform, if their financial situation is still relatively simple.”
Mr Wynn believes it’s time for advisory firms that haven’t yet given due consideration to such issues, make the time to look at them closely. “If a client doesn’t feel the firm has a clear plan in place they will turn off their need for on-going advice – so don’t give them that reason,” he says.
Danny Wynn, Director, Platforms and Policy, Legal & General
