Opinion  

With Friends like this, who needs a sunset clause?

Michael Trudeau

A fairly typical end-of-summer news week became a full-on battle-stations conflagration when a disgruntled IFA contacted FTAdviser to reveal that one insurer had decided to pocket the trail on certain investment bonds.

It was by far the most talked-about story this week: Friends Life will cease paying trail commission on two of its investment bonds, Premium Select and MLC. The decision will affect 800 policies, the firm said.

As has become customary with decisions of this nature in the post-Retail Distribution Review world - for Friends is not the first to make such a move - the company argued that the cost of setting up systems to facilitate legacy trail would be prohibitively high when the bonds move from current administrators, Axa Isle of Man, to HCL in October.

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The typical and understandable uproar that greeted the story saw a number of advisers state they would refuse to do business with the firm. One commentator on the story prompted a follow-up blog questioning whether advisers can justifiably boycott a company out of principle post-RDR. For the record: most said yes, as the firm has proved itself untrustworthy.

In the wake of the furore, Standard Life, which has previously found itself at the centre of a similar don’t-touch-our-commission imbroglio in different circumstances, reiterated to FTAdviser its argument that the cost of developing the relevant systems would so far outweigh the “relatively small benefit” that it would have to be passed on to the customer elsewhere.

So tell me, have they a point? As it is, the cost will in many cases be passed on to the customer via advisers who may be forced to “double charge” their clients for ongoing service. If trail was kept in place, the provider argues the costs passed down to the client would be even higher.

It hardly seems fair that it should be the advisers that become the bad guys, but then the regulator guaranteed this when it said in its RDR rules that providers did not need to rebate trail that had ceased and that it was up to the intermediary to monitor whether a product continued to represent good value.

To their credit

One piece of good news came to the fore early this week when the government, via the Financial Conduct Authority, revealed it would give a rebate to advisers and other businesses which have previously paid for indefinite consumer credit licences as the responsibility for consumer credit transfers from the Office of Fair Trading to the FCA.

Pressure had been mounting after the FCA issued bills for interim licences valid until October 2014 which demanded £150 from sole traders and £350 from “most other firms”. Having paid for a permanent licence, many were understandably aghast to be hit with further fees.

Well, now they’ll get the rebate (better late than never, eh?). And firms can receive a 30 per cent discount if they register before 30 November.