During the early phases of the RDR there was a great deal of very well organised consultation on the shape that the programme should take, and industry stakeholders of all shapes and colours were extensively involved.
At the time, and often since, I commended the Financial Services Authority (FSA) for the most highly effective and inclusive consultation process that I had seen in my 20 years working in the sector.
However, in recent months, I must admit to being more concerned. Although there is a delivery schedule for the RDR, the detail of the rules should be properly worked through, and not rushed.
Take the recent rules regarding the transfer of trail commission. I don't think anyone would disagree that trail commission, in respect of initial services or in lieu of an upfront advice payment, should not be transferred to another agent. However, the FSA rules currently suggest that trail is always in respect of services already provided, and therefore should only be able to be rebated to the client in future. Clearly this is often not the case. Fund based trail in particular is often utilised to cover the cost of annual investment reviews on portfolios or reviewable contracts such as drawdown.
I don't think that the implications of only allowing a rebate have been fully thought through. Over the past few years large numbers of businesses have been actively moving clients towards more recurring payment mechanisms to build more sustainable, long-term client relationships which are less reliant on wrapper sales for income.
I can see two huge disadvantages to clients in the advice market if trail payments are not allowed to be transferred where they are not in respect of an initial service. Firstly, it will restrict the ability of clients to freely choose their servicing agent on an ongoing basis without recourse to specific fee payment, and secondly, it will disincentivise the purchase of client portfolios unless new sales potential exists or fees can be negotiated.
I cannot believe that is in either clients', advisers' or the regulator's interest to impede customer choice in this way, and that is why I hope that recent suggestions that the rules will be redrafted in this area will soon become part of an open consultation once again.
Ongoing payments for ongoing services which can be transferred at will by clients are at the heart of a more competitive advice marketplace. We need more clarity, and soon.
Steve Folkard is head of pensions and savings policy at AXA Life
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From 6 April 2019