Trail commission post RDR

The FSA has never understood trail commission. It is high levels of initial commission that has led to consumer detriment - advisers who take 7% initial on a bond with no intention to ever see the client again (unless they have more to invest). Those advisers who have slashed initial commission (perhaps to zero) because they are willing to take on a long term commitment to service the client have seen trail as a method of remuneration which suits both themselves and the client - if the client switches advisers it is usually because the promise of service hasn't materialised. Post RDR the client will see an opportunity to switch advisers and reduce the overall annual charges on their investment by 0.5% (typically) even if their current adviser has set up investments with no initial commission or fees and has since provided an excellent service. So the rogues and sharks will continue to do well and the honest and fair advisers will lose out. Good thinking FSA ! Perhaps I need to stop thinking about the client and make hay while the sun shines.

Posted by: Bill Wells

Whose money is it?

This is where the FSA really show a lack of understanding. The money (from trail) surely "belongs" to the client and surely it is up to the CLIENT to decide where that money goes. If the CLIENT wants it to go to the former IFA, which is unlikely, that's THERE CHOICE. If teh CLIENT wants to have it rebated and then pay is to the new IFA, complicated but plausible, that's THEIR CHOICE. If the CLIENT wants it to go to the new IFA to pay for/towards the service being provided, surely the most likely, that again is THEIR CHOICE. I know we still live in a democracy as we had a laughable election last week and whilst the afterevents were laughable, it does still prove the UK population has a CHOICE! I don't remember anything in the FSMA2000 which gave the FSA authority to remove that choice?!?!?

Posted by: You must be joking

Choice.

hen you analyse all of the above it appears that the FSA and the government want to control the general consumer under the guise of looking after them. If you look at all comments over the months/years you will see a pattern emerging from those who have a very nice job at the top of the tree about control. There was some idiot(who to be fair I cannot remember his name)in a high position decided that people who wanted a mortgage should take an exam before getting one. These people seem to think that they know all about everything.

Posted by: terry

Clarity required.

Surely the 1st step is to ensure the regulator clarifies whether the trail is merely the conversion of some up front initial commission such as may have been paid for investment bond business spread over time, or whether it is in fact an ongoing fee recognising the fact that work is required to deal with the ongoing servicing/administration of that customers investments/policies? If it is the former then I would accept that there is no reason why the new advisor should be able to receive the benefit unless it has been purchased from the original advisor. If in taking over the servicing of that business; and it is agreed with the customer that the receipt of that trail forms part of the payment for ongoing service, which the new advisor will provide, then where’s the problem?

Posted by: Matt Cunnell

Who owns trail?

The key is in the product material and commission agreements. I work for a product provider and have had to sort out many disputes between advisers and customers over trail, especially on change of adviser. There never has been a single industry view on what trail was for, some providers viewed it as ongoing serving commission, (regardless of actual service provided) other companies viewed trail as deferred initial. As the FSA doc says, 'it depends on the agreement between the product provider and the previous adviser' Some products/agreements do not allow trail to be transferred to another adviser or the client, there is no way that hundreds of legacy products could be modified to pay trail to the customer, and has anybody thought about the tax implications? I've always preferred the customer to decide who should get any trail, after all they pay for it, and should be getting that ongoing service.

Posted by: Andy Newman