Advisers are being forced to take “creative licence” over how they document legacy commission for the regulator, Simon Mansell has claimed.
The managing director of Worcestershire-based Temple Bar Independent Financial Advice said the FCA’s requirements for recording commission were proving “horrendous” for advisers to cope with, as providers do not match income streams with clients when sending commission statements.
He said: “We are obliged to take creative licence about where each income stream comes from, because we cannot identify this by looking at providers’ commission statements. So the regulator wants A, B, and C in terms of specific data, yet we cannot accurately provide those elements.”
Mr Mansell argued that the current system was “stuck in the mid-1980s” and called for more sensible approaches to gathering information on commission streams.
He added: “Why can’t providers supply this data to the regulator? Broker consultants also have information about our investment business, so why can’t the FCA look at its management accounts?
“Instead, I had to spend an entire Saturday trying to interpret the regulator’s requirements in terms of documenting fees from platforms, in addition to running my full-time business.”
A recent survey conducted by Panacea Adviser, an adviser resource hub, found that 92 per cent of advisers would describe the removal of trail commission as “catastrophic” for their businesses.
In its most recent June meeting, the FCA’s executive board confirmed that there will be a post-implementation review of RDR, which will consider whether the lack of a so-called sunset clause for trail commission on pre-RDR business could create “poor consumer outcomes”.
Jason Lurie, partner for London-based Holland Hahn & Wills, said: “Fortunately, I do not deal with the financial administration in my practice, though I understand there is a level of complexity and time involved in documenting trail.
“We have operated on a fee-only basis since 2006 and we only have legacy commission on certain products. For those areas, it definitely helps to have good record keeping and the right back-office system that you can understand.”
The FCA is due to report on further thematic reviews about the RDR’s effects, though it is not known whether it will examine the possibility of an end-date for legacy commission.