ABI: FSA legacy policy 'fundamentally' changes RDR

The ABI has voiced its concern over the lack of clarity surrounding legacy rules and said the regulator’s latest stance marks a “fundamental” change to the Retail Distribution Review (RDR).

In a legacy commission paper sent to trade bodies in April, the FSA said it will permit trail commission for business sold pre-2012 but restated it would be "undesirable in principle" for legacy commission to be paid post RDR.

It defined legacy commission as an 'additional payment' made to advisers in relation to a contract signed before 31 December 2012 but as a result of an event taking place after that date.

However, the ABI said the new policy does not just fail to provide clarification but rather marks a sea-change in thinking.

"The FSA's letter represents a fundamental change to the RDR, which is very late in the day with little time to implement changes ahead of the 31 December 2012 deadline," it said.

The trade body added it will investigate the "ramifications of this change in policy" both with members and the FSA.

Meanwhile, it has emerged the IMA is playing a major role in efforts to clear up ongoing confusion over the legacy issue.

"We are having regular discussions with the FSA over trying to get clarity and parity over how legacy business is to be dealt with by fund managers and platforms post 2012," said IMA senior adviser of retail distribution Andy Maysey.

Last week, IFAonline revealed industry stakeholders are trying to reach consensus on legacy rules amid fears RDR could be delayed if the regulator undertakes further consultation.

Maysey said the platform policy paper, due at the end of July, will not address the legacy issue and added it is therefore vital the regulator offers guidance as soon as possible so stakeholders can put the necessary systems in place.

He said it is crucial the FSA understands the complex workings of the fund management industry if progress is to be made.

One such complexity lies in the difficulty fund managers face deciphering if a purchase made via a platform is advised or not owing to the fact they receive aggregated, rather than individual, instructions on such purchases.

April's communication from the FSA also raised concerns the regulator could bring more products under the scope of adviser charging, such as old life insurance contracts.

But Maysey said no "cut off" in terms of product type has been discussed.