Insurer Aegon has warned of the "disastrous" ramifications of removing trail commission following a fund switch - a move the FSA hinted at in its latest consultation paper on legacy commission.
In the November consultation paper (CP11/26) on the treatment of legacy assets, the FSA set out its long-held intention to allow trail commission to continue to be paid from 1 January 2013 on contracts set up before that date.
However it set out plans to ban 'legacy' commission - money due to an adviser as a result of a change to the existing contract made at any point after 1 January next year.
It was assumed fund switches would not come under the legacy ban because the switch is not an "event" involving new money and would therefore not result in "additional payments" or commission being due to the adviser.
But Aegon has voiced concern that under, one interpretation of the legacy paper, activity such as advising on a fund switch within a bond or personal pension could trigger a ban on future instalments of trail commission.
This activity would not normally generate any additional commission payments.
Aegon has said any new rules switching off ongoing commission would go against the spirit of RDR and not be in the best interests of customers, advisers and providers
"There is a suggestion that, if you have a personal pension or bond paying trail commission and the IFA advises a customer after 2012 to switch from fund A to fund B, then that's new advice which kicks you into an RDR environment meaning you have to turn the commission off," said Aegon head of regulatory strategy Steven Cameron.
The legacy paper referred to switching funds as "buying and selling units", stating the action constitutes post-RDR "advice" - seemingly bringing it under adviser charging rules.
"Turning off trail commission would be disastrous and really unfair"," said Cameron.
Meanwhile, Axa Wealth has voiced similar concerns over the lack of clarity on trail.
"We are aware the legacy paper has caused confusion across the industry, with some companies taking the view that an advice point would cause trail to cease in all circumstances," it said in a statement.
"We have urged the FSA to clarify the position as soon as possible to remove the uncertainty."
An FSA spokesperson said: "The consultation paper on legacy assets is asking people for their feedback on particular issues on which there is still some confusion."
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