Despite being under the threat of closure should a Tory administration emerge after the general election, the Financial Services Authority (FSA) marches on with its reforms.
The Retail Distribution Review (RDR) is a large ongoing review of the relationship between financial adviser and client. It will, if followed through, change how IFAs charge customers for their services.
Most people would regard this as just an IFA problem and nothing to do with them, but it will also have a far reaching impact on customers.
One of the aspects of payment that the FSA wants to change is that of the so called ‘trail commission’.
When a client buys a financial product the product provider normally pays the adviser commission for introducing the business. That commission is then effectively added to the cost to the customer of that product. To a customer it looks like they’ve had free advice unless they look at the paperwork. As ever different providers pay different levels of commission for similar products. This is generally known by customers.
What those customers may not be aware of though, is that the provider also pays the adviser an annual commission after the sale as long as the client keeps the product. This is to pay for the adviser’s ongoing servicing of the client. The cost of this is also borne by the client whether they do or do not ever hear from the adviser again.
When IFAs retire or cease trading for other reasons they usually sell on their client database, which includes the rights to those trail fees. In many cases the client will be unaware of this transaction.
The FSA has decided that, after 2013, when changing IFAs the trail commission reverts to the client, not the ‘new’ adviser. This puts the money in the client’s pocket so they can decide who to pay for advice and how much.
This rule may well make the transfer of IFA business almost impossible. It will also throw many IFA’s own well laid retirement plans into disarray.
The Chief Executive of the Institute of Financial Planning, Nick Cann, is amongst those calling this a ‘step too far’, but others believe that it is in the best interests of the client that this is followed through with.
——-Go To ‘eToro’——
------ Other articles of interest ------
Tags: FSA, ifas, News, rdr, trail commission
What those customers may not be aware of though, is that the provider also pays the adviser an annual commission after the sale as long as the client keeps the product. This is to pay for the adviser’s ongoing servicing of the client. The cost of this is also borne by the client whether they do or do not ever hear from the adviser again.
Therefore, dispassionate advice is something hard to come by unless one is very careful?
Hey Admin,This is an awesome blog. If you might ever need any backlinks vist the following link ( http://marketingyourbusiness-mike1242.blogspot.com/ ) .