Incompetency in your face again

This is more stupid than it sounds. In the event of the renewals being paid back to the client, how are the providers going to do it? e.g. How are they going to factor a rebate into a policy when these contracts were set up with a totally different structure? Are they going to write a cheque out for clients on a monthly basis for 50 per month as many renewals are very small payments? No they will just keep them that's what'll happen. Renewals were paid as part on the initial commissions and now the FSA are taking it away. The FSA are like a bull in a china shop and act like ignorant pigs who know nothing. P S Pigs have more sense so apologies to pigs

Posted by: Incompetent Regulators Awards Team

The only purpose this rule serves...

... is to prove what many of us have suspected all along, that we are regulated by idiots with a nasty spiteful streak in their makeup. We have long taken on existing portfolios on a nil or minimal initial charge basis and serviced them for the ongoing remuneration alone. In future that practice will be made impossible and providers will have to spend a fortune on system changes to cope with the institutionalised stupidity that this rule represents. I long ago concluded that dialogue with the FSA was a waste of time. Roll on a new government, whatever colour it is, so we can talk to them about abolishing this malignant institution. Meanwhile of course, while the FSA concerns itself with making the job of honest advisers more difficult by pointless rearrangements of the regulatory furniture, nothing is done about the likely future mini-Madoffs. (Wakey-wakey and hello Mr FSA Head of Enforcement - you know who I mean.)

Posted by: Neil F Liversidge

Novations?

Has anyone got any idea how this will affect advisers who move to new firms or networks? Will renewals be able to be novated to the new firm with the adviser? In effect this is the client changing their agency to the new one?

Posted by: Harriet

best advice

Would the best advice to all clients be change adviser. Bank your commission and then change back again if you like.can a client simply sack and adviser without appointing a new one so that they can get their commisssions

Posted by: Spike

All wrong again

I agree with most of what RDR is trying to achieve. However, Nick Cann could not be more right in stating that this is a step too far. The FSA seem to be mixing their messages. First, the trail commissions/fees were described as only being allowable if you can demonstrate a commensurate ongoing service. Now they appear to be saying that it is part of the up front advice. This is simply wrong. The adviser would already have been paid for the initial advice. Trail should always be for continuing service. For good or bad RDR is forcing early retirement on some advisers. By taking away the source of one of the only valuation methods for existing businesses they also seem keen on forcing a poor early retirement for some of these people. They SERIOUSLY need to change their mind.

Posted by: Stuart

Pensions

Hows' this going to be done regarding pensions then. My understanding is that clients cant take a split of the commissions on pensions, something to do with pensions law, or have I got that wrong?

Posted by: Birder

Calm Down

If you change agency, I expect the trail will revert to client. I imagine te FSA will instruct providers to rebate trail into the client's pot whenever they receive an agency change request. Shouldn't present a problem. Explain the issue to the client. I'm sure the client will approve any value for money ongoing service mandate and if you want that linked to fund performance, say at 0.5% per annum or whatever, go ahead. Providers have already moved to take instruction from you that effect which you'll be able to do once the client approves it. I think all the FSA are doing here is trying to improve transparency as a means to help rebiuld trust. Seems like a good idea to me.

Posted by: Michael

Pigs

I like pigs - they treat you as equals (unlike the FSA)

Posted by: Bob Stark

death of a national!

If an adviser leaves a national or network after jan 2013 they will give up the trail on any plans completed without service agreements in place. Who wants to be tied in to a company with that sort of hold on you?

Posted by: ned

Footnote

I think the bigger concern is the Treasury/FSA agenda. Hopefully it is not disingenious. If it is motivated by trying to improve service standards, fine. If, however, its nothing more than a smash & grab stealth tax, that would be less welcome. As I understand it, intermediary commissions are none VATable whereas professional service fees agreed by the client are.

Posted by: Michael

FSA Trail Ban

Here we go again not only are the FSA mindless of the implications they are perusing they are destroying peoples lives IFA’s that have built up trail and do look after clients using the revenue to support their overall activities and are about to retire find themselves with a real problem as I see it regarding the value of their business, and in most cases a lot of hard work for many years for what it is just so depressing we IFA’s are hammered with everything is there no justice in this world I think not and the last place you will get it from is the FSA, how about when these morons retire we tell them they have no pension that should go down a storm with them. No it is just another case of making rules with out proper consultation with those at the coal face it is just so easy to make these rules up in an ivory tower (which incidentally is costing us a fortune) nothing new there then. What a mess I have spoken to two of my local MP’s about RDR and both new nothing about it that says it all about consultation so we have very little if any hope in changing the disgraceful face of the FSA.

Posted by: Jeff

Trail trial

I have just spent all morning writing a comprehensive review of my clients AXA pension. I am posting it to him tonight. My time and skills are being remunerated by trail commission. I am retiring in 2012 so what happens in 2013 is not too much of a concern but what a nonsense! If my firm ever sells on and my client is advised elsewhere then (because I know him - have the FSA forgotten the very sensible tenant of 'know your client') he will not be interested in paying directly for the service I provide and so his pension will suffer and he will suffer in turn. Fair play wins out again huh? It is about time the FSA realise most members of the public (both rich and poor) view the work entialed in managing their own finances much in the same way as looking after their own teeth. They want them to work and be healthy - but do the public maintain regular contact with their dentists; and for those that do is that not largely due to the efforts of the dentist?

Posted by: Geoff Pollock

Surely not!

Are the FSA saying that trail commissions are actually upfront commission paid over time, and that they were never designed or intended to be used for servicing in any way hence they will be turned off when the adviser leaves the firm that originally made the sale! This is outrageous next they will be saying that people need proper professional qualifications to give good advice and that advisers paid by product providers to sell things are in some way biased!

Posted by: David

Trail

Yes this is a pretty dumb idea. We have many small clients where we are prepared to give a basic service (annual valuation,telephone conversation, investment updates etc) & possibly trail is only £20/£30/year. We would be unable to provide this service for new clients if we are not paid & to go to the lengths of negotiating with product provider etc just isn't worth it. So less service for clients. I suppose the only plus is it won't be worth anyone trying to pinch your business. BIRDER further to your comment on pensions. No clients are not allowed to have a split of pension commission. This can invalidate the pension. However you can of course rebate commission back into the pension

Posted by: Nick

Not My Fault

Excellent News I can now take on new clients and ignore any element that has been handled by the previous broker. If there is a problem with the pension or life assurance. just say "Not My Fault, I did not write the business and I dont get paid for reviewing it either" Howevet I am sure the CAB can help you, as you do not have to pay them.

Posted by: David Peters

Dont Panic!

In my relatively short life as an IFA I have already witnessed our regulator enforcing "questionable" policy, but here I see no reason for mass hysteria. Those amongst us committed to the idea of "after-sales" servicing, and to the full and timely disclosure of costs and charges, have nothing to fear. If the client understands what your service proposition involves, and more to the point sees the value in it, then they will pay a fee as readily as they would have sanctioned the payment of fund-based remuneration from the provider. This will undoubtedly represents a fundamental shift in attitude for many advisers, but it is a step in the right direction. I see no reason why businesses cannot continue to be valued on the basis of recurring income streams going forward. Evidence of the longevity of a true fee-paying client relationship would give me more confidence (as a potential investor) than a bank of inherited trail where there is every possibility the clients aren't getting serviced or worse have no idea the provider is paying the IFA behind the scenes!

Posted by: Glen

POINTLESS

Are these the death throes of some mad and wounded animal charging around and trying to hurt everyone in its sight? On top of the foolishness that comprises the bulk of the RDR proposals we now have this ill-thought out nonsense that destroys the business models of virtually all advisers. Years back I, and many others, made the decision to take smaller initial commissions in return for trail which not only made the contract better for the client but also provided an incentive for me to regularly review and re-assess. This not only seemed sensible from my point of view but also derailed the 'greedy adviser' arguments concerning 5/6/7% plus initial commissions. With hindsight it can be seen that the 'greedy advisers' were right. The FSA is now punishing decent advisers for their commonsense and decent business models. What a tragedy that these people are allowed to destroy one of the few industries that makes money for UK plc.

Posted by: Alan Lakey

trail commission

I service quite a lot of clients whose policy pays me probably £2.40 per year(yes you are reading it right. It might only be a phone call or letter or annual statements. At this point for whatever reason, there is no new business. so under the new so called system,thousands upon thousands of clients will not get reviews or ongoing service. This is probably why I am not earning a fortune becasue I do believe in keeping a promise to the client that I will look after them So we are back to the situation where a client wants a visit or any other sort of attention they will have to pay a fee.Cannot the blockheads who keep on battling on about fees relate to the ordinary person who both incomes only amount to £30,000 or less who have the normal costs to cover Mortgage/ rent/ council tax/food/travelling etc which go up every year without wage increases. Why should they be excluded from advice. The FSA have no idea about the majority of the general public, because they are cosseted by wages beyond that being earned by the majority. It would also be interesting to know how many employees of the FSA lump out £200/300 for financial advice or do they think they know it all.

Posted by: terry

More Madness from the FSA

This will hopefully be the final nail in the FSA's coffin, again proving their incompetance to one and all. The sooner this bunch have gone and a new body that actually understands IFAs is appointed in their place (without any of the existing staff transferring across), the sooner we can all get on with providing real honest advice to our clients.

Posted by: Daniel Wackett

Networks and trail

Just a word of warning for those of you who are network members. Networks may change their minds and not honour the payments after 2012/13! So be on the watch out, there may be hidden agendas behind the scenes!

Posted by: Incompetent Regulators Awards Team

Clarity as to who is the Adviser needed

There are two major factors that need clarifying: 1. How is the trail paid to the client? I expect it will not be paid over, but that the provider will stop deducting the relevant amount from the product, or reinvest it, to the clients benefit. That also gets over HMRCs effective ban on pension commission rebates, as HMRC regard payment from a pension to the client as breaching the pensions tax status. 2: Who is the Adviser? The FSA rulebook (kept by my bedside) defines an Adviser as: "an individual who is: a representative,an appointed representative or a tied agent". Note it does not say "firm" or "network"! Is the FSA seriously saying that whenever a client moves from one individual adviser to another, who may even work for the same IFA firm, the financial agreement with the IFA firm has to be re-written? Almost certainly not. So they must mean when a client moves from the main regulated body (a directly regulated individual or firm, or from a Network). This will hardly impact on an individual adviser moving Firm, as he will get all his or her clients to sign an agency transfer instruction including an instruction to continue paying trail to his new Firm. It will, however, seriously impact on any organisation larger than the individual which wishes to transfer/sell its business on, or which is looking to raise finance secured on its assets. WHy? Because as expressed in the FSA Feedback "a change of adviser for whatever reason" (so including an agency transfer to another regulated body)"where the trail can be switched to the new Adviser" requires the provider to cease paying trail other than to the client. So a block transfer of agencies from one firm to another will become impossible, as it is not practical to obtain the prior written approval of each client to trail continuing to the new firm. At a stroke the FSA will undermine the financial status of any reasonable sized organisation, and make it impossible for an Appointed Representative Firm to move Networks!

Posted by: Ian

Another kick in the b***s

I am completely astounded by this latest ruse by the FSA to deprive decent hardworking and honest IFA's out of a living. I like many have taken trail and in many cases a very low initial commission when arranging investments and I continue to so. I plan to retire in 2016 but to be honest I wouldn't buy my business post 2012 if there was no trail commission. Perhaps for my remaining years I should take the maximum upfront commissions with no trail and offer no ongoing service? Hmmm sounds a little like the banks proposition to clients.

Posted by: Simon Franklin

Trail Commissions

I don't believe it ! FSA are going to break the contract advisers have with their supplier ( in this case the product provider) and break the contract of the consumer with their advisers. As a consumer I am going to break switch my IFA - to get the commissions - which I understand it is illegal for the provider to pay to consumers. Having worked for Scottish Widows as a broker ( now just broke ) consultant Scottish Widows sells their products direct to the public - and trheir owner TSB Scotland sell many products through their tied salesforce. With such a volume of business Scottish Widows have always maintained " the client is owned by the Scottish Widows", where other comapnies trea their advisers with more respect for the work they do. How will the FSA monitor this ? This is a klondike for insurance companies - who retain the trail commissions of prodcucts sold by their flogging sales people and it will generate even more aggravation for customers - destroy the healthy business relationship and the greedy and the incompetent i.e bank advisers will sell ! sell ! sell ! for the highest levels of new commissions - without ANY thought to the long term business relationship. Clearly Banks like Nationwide and TSB are already scarrifying their client banks - selling products churning policies in the banking churn and burn processes against theri customers - and they can afford to . . . .and the FSA has highlighted TSB as one of the worst offenders.

Posted by: Ian Lees

Here we go again!

The evidence is being gathered. The days of the FSA are numbered. Change is needed now more than ever. The principles behind RDR are right. Client awareness from the Advisers view are paramount, but what about treating the Advisers fairly? We need a new regulator where we as advisers can become members, yes members as solicitors are regulated by the Law Society but are also members and it's the same for accountants. So why can't we as advisers do the same? We would likely have more say about what happens at the sharp end- how our relationships with clients can be strengthened and not weakened by mindless, thoughtless people who have no idea how to manage client expectations. Most of my clients could not afford to pay fees, and most of my fellow IFA's are the same, so how do the FSA propose to allow the future servicing of client business in the event of a National IFA or Network- Park Row for example- going bust and the existing adviser continuing to be paid via his or her new company?

Posted by: Sean Dawson

ABSOLUTE PRATS

Call me paranoid if you like, I don't care. They really do hate us and they really are out to anihilate us. When are we going to march on canary wharf and pull these parasites down from the lofty positions they have appointed themselves?

Posted by: Paranoid

Trail Commission

Like most who have already commented I do not service high net worth clients they sit in the Banks' domain. This legislation points to actions to rid the UK of the small independent, leaving only large institutions perhaps easier to regulate. Trail commission was the basis of how I built up my business not taking huge amounts up front. For example many speak of the ISA season, I do not have one as most of my clients are set up on ongoing regular premium ISAs. I am being persecuted for setting up for my clients a highly successful investment strategy that cost averages investment of long periods of time. Their action is unjustified, immoral and I feel has an underlying agenda. I bet the PM when he is kicked out will have a lucrative job on the board of one of these institutions.

Posted by: John

FSA Madness

The most serious implication here is that clients could purposely change adviser after the implementation of this mad rule, in order to gain financially. Almost certainly some smart journalist in the Sunday papers will alert clients to take this course of action. Does this not once again smack of retrospective rule changes and does it not contravene our human rights as advisers.

Posted by: Chris Ollis

Trail Commission

If commission is passed to the client in respect of pension plans, is this not against HMRC rules and won't the pension plan lose it's tax status?

Posted by: Paul Racibowski

What Human Rights

To Chris Ollis We do not have any human rights to contravene.The FSA can do to us as it pleases. no one will stop them.

Posted by: Downtrodden

disposal

It appears from all the recent events that the FSA are simply trying to "Ethnic Cleanse" the advisory market, particualry the smaller IFA business.I can only surmmise they distrust the whole working practise of a small IFA practise and are simply trying to make it more difficult to continue practising. What comes around goes around!

Posted by: alan

SOS

Surely the day cannot be too far off until they round us up and put us all in concentration camps.They are systematically destroying us.It is blatant ethnic cleansing.If this were happening to any other section of society there would be a public outcry.The FSA has made IFA's the pariahs of the financial world in spite of evidence to the contrary.

Posted by: Ashamed to be British

Link turning off trail to file destruction

IF the FSA are allowed to do this, then every IFA should destroy their file 6 years from the date when trail was last paid as the client has chosen not to pay for file storage to prove or disprove whetehr advice given was correct or wrong. The FSA cannot expect a firm to keep a file for infinity (that is what theye xpect if we have no longstop), if they allow the trail to be turned off which either pays for storage of the paper file or back up of an electronic version. This was NOT priced in at the time when teh advice was given and is clearly changing the goalposts of teh contract with the client and the provdier at teh time advice was given. I am all for adviser charging/customer agreed remnuneration and my firm alreayd works on it, but the dividing line should be 2013 new business forward is one thing, what has happened before Dec 2012 shoudl stand with NO intereference from the FSA. Will the FSA insist the firms who took 5/7/10% instead of 3% plus 0.5% rebate any of that commission? I think not, so but out FSA unless you level it for all, then don't pick on those who have looked to build a longtop model rather than get rich quick.

Posted by: Phil Castle

Uh?

to Phil Castle and others - your post refers to an apparent banning of trail commission? The story only refers to banning trail for clients that move to another IFA (so will no longer be your client)? Has ifaonline changed story after comments were written, or have the comments just turned into Chinese Whispers, with no-one actually reading story?

Posted by: Richard Price

DUH!

Richard Price If you do not understand what others are concerned about then you either work at canary towers or you are really naieve.(that is mr being polite) Wake up and smell the danger.

Posted by: lol

Total Muddle

First, does the FSA actually have as its remit the conrol of commercial reward of ANY regualted firm (NOT JUST IFAS). IT sounds to me as though they have stepped outside their err.. competence. But we, actually you, as I have hung up my boots have been partly to blame by providing this target due to confused thinking as to what trail commission represents. To the ardent "it's for servicing camp" I give you two real life examples. 1) A good client wanted to arrange a savings plan for a new grandchild. Best option was £30 pm unit trust. Commission 60p p month payable when commission to the Adviser firm was in excess of £100 i.e. every month when I was with a national network, virtually never when I moved to a small firm! 2)A complex IHT plan with an unsurrenderable offshore bond up to 8% up front (My name is NOT Arthur Daley) or anything down to 3 plus a half. The trail wasn't for servicing in the future, it was a better solution for the client to pay over time even if it was to my detriment. And to those who say it was deferred initial commission, did you EVER take over the agency of a contract and receive trail? Isn't that hypocrisy. And what about providers? When I retired the FSA told me they had no problem with trail commission being paid to deregulated individuals. NOT ONE that I had an agency with would do so. All told me that any deregulated agency would have the commission taken internally until a new IFA took over the contract And what message is the FSA sending to consumers. "Any contract you signed can be broken any time you like". Is that ethical?? Frankly RDR is so poorly thought through not just as to implementation, but the disastrous effect "fee only" will have on accessability it needs to be stopped right now. Already we are starting to see an increased nterest in national firms for a limited direct sales force for limited product ranges. Is that really the objective deja vu!

Posted by: David