Will trail commission survive for advisers or will the regulator take it out of the equation completely? Henry Brennan finds out
As the debate around the merits (and ethics) of trail commission in a post-Retail Distribution Review (RDR) world continues, it would appear the regulator is considering the merits of an all-out ban.
Minutes from the Financial Conduct Authority's (FCA's) board meeting in June showed the subject was again on the agenda.
Trail commission was raised in regards to whether the earlier decision not to impose an end-date for payments on pre-RDR business might have negative connotations for clients.
This comes on the heels of another sign the regulator is keeping a close eye on the subject.
Its RDR implementation questionnaire, sent to 50 firms earlier this year, asked what ongoing services firms were providing to justify receiving legacy trail payments and how they ensured the client was receiving them.
With the FCA starting to take a renewed interest in the subject, is it just a matter of time before trail commission disappears altogether?
Its decline, although not its demise, will be accelerated by end of legacy fund manager payments to platforms from April 2016. A number of platforms are electing to move towards a full adviser charging model well in advance of this date.
The Standard Life platform will be switching off trail commission and wrap adviser fees payable on mutual funds invested in ISAs and Personal Portfolios from November when it begins its mass migration of retail share classes into new clean classes.
Cofunds stressed the importance of coordinating the migration with advisers.
Cofunds commercial director Adam Smith said: "Our view is that platforms should actively work with advisers to migrate their client books over to clean share classes and therefore platform pricing at a time that works for them, but obviously in line with the FCA's timeframes set out in PS13/1.
"This means the adviser is in control of their proposition to their clients, not the platform."
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