FCA has 'no immediate plans' to deal with pre-RDR trail commission

As part of its Asset Management Market Study, last June it consulted on whether it should remove trail commission on share classes sold before the Retail Distribution Review (RDR), but the FCA seems to have put a stopper in any plans to ban such commissions.

The regulator said it had received "a range of feedback on both sides of the deabte" that will inform its wider consideration of the issue.

The RDR had banned trail commission on new products when it came into force at the end of 2012 but the commission is still being paid on advised share classes bought before 31 December 2012.

In its interim report on the asset management market study published in November 2016 the FCA said 21 asset management firms reported paying a total £1.4bn in commission in 2015. It also said those invested in pre-RDR products were paying more to invest.

Research from Fitz Partners released last week found one third of retail assets invested in UK funds are held in pre-RDR share classes that still pay rebates to financial advisers. 

When RDR was introduced in 2012 more than 70% of UK retail assets were held in 'fully loaded' share classes. This proportion has fallen steadily by around 10 percentage points every year, according to the firm.

When the FCA last June said it would consult on whether to remove trail commission advisers told Professional Adviser the ban could hit the value of some advice businesses and see some go under. While noting the complexities and dangers of implementing such a ban, the same advisers also argued the ban of trail commission was long overdue and should have been effected sooner after the implementation of RDR.

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• Topics
• Regulation
• Charging
• FCA
• commission
• trail commission
• FCA Asset Management Study