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.
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.
Last time we checked however the regulator could not definitively tell us exactly which firms would need such a licence. This remains a major concern with the new regime, especially since the OFT told us previously new RDR charging models might equate to providing services as credit.
A right fine mess
On the subject of protecting your money, Aberdeen Asset Managers and Aberdeen Fund Management Limited were smarting this week after being slapped with a fine for more than £7m relating to client money failings.
According to a statement from the FCA, the firm did not submit correct paperwork to protect an average daily pool of £685m in client money held in money market deposits, making the fine just over one per cent of the money at risk.
The company was quick to release a statement claiming no retail investors’ money was affected by this and that the money it had failed to properly protect belonged to its institutional investors. It also amusingly contacted FTAdviser to complain we’d added their old logo to the story and they’d prefer if we used an updated one.
The Aberdeen statement points out that no client money was lost, which is nice, but kind of like a child justifying biking without a helmet by saying he didn’t get himself killed.
Blue around the gills
I’ll admit I was caught by surprise this week by Towry’s acquisition of Bluefin Personal Consulting. Early in the week Towry chief executive Andrew Fisher told me I could expect to see an announcement “in the next few weeks or longer” but wouldn’t confirm or deny that Towry was looking to buy.
So when the news broke on the Stock Exchange three days later I had to wonder if Mr Fisher was trolling me. That said, maybe there will be some huge development which becomes apparent in the next few weeks as promised - the firm has said it is in talks with 85 firms previously.
Financial (increasingly) Limited
Finally, the debate on the post-RDR health of networks had a fresh bone to gnaw as adviser network Financial Limited revealed it had lost 8 per cent of its advisers. The 8 per cent figure comes from Financial managing director Brian Galvin mind you; research consultancy Imas said it was actually twice that.
Still, that rate of attrition is apparently less than the network had forecast. I wonder if other networks had made similar predictions?
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