Grant Thornton tax expert, Dean Jefferies covered off this thorny issue in a webinar broadcasted last Wednesday. If you missed out, don't despair - watch the presentation in full.
With the holiday season coming up fast, our blog has all the details of the support available to you, including the opening times of our Adviser Support Centre as well as the postal service available this Christmas.
We've changed income mandates to be at product level rather than fund level, so the funds held within a product are all either set to take income or to reinvest - making your clients' portfolios much simpler and quicker to manage. Find out more on how the change affects you and your clients.
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Following the FCA issuing the final rules on adviser charging under the RDR, the industry responded seeking clarity around the treatment of legacy assets. As a result they've now issued the FCA Consultation Paper 11/26.
Trail commission as stated in the previously published RDR rules:
Defined as ongoing commission payable for advice provided pre-RDR and normally continues to be payable while the client holds the investment concerned and can continue to be paid post RDR.
No change required to the agreed arrangements between the client and adviser:
Adviser business sale and change of adviser
Where a firm is sold to another advisory firm or where a client moves to a new adviser, the new firm and adviser can continue to receive the trail commission.
New adviser continues to receive trail provided they make certain disclosures to the client and provide an ongoing service.
Client continues under the commission remuneration model with the adviser.
Ban on new 'legacy commission'
Legacy commission is defined as additional commission that may become payable in relation to legacy assets where there has been a change or addition to the product or investment post-RDR.
This includes a top-up to a life policy or the buying of additional units in a unit trust.
Removes all product bias as new investments into legacy products will not pay commission.
The result is that the Investor is not being advised on a product due to commission bias.
Recommending a client to either -
Are all deemed as advising on investments (see next section for treatment of residual balances).
No commission can be paid.
Client must agree remuneration with their adviser.
of regular payments into a fund are all deemed as advising on investments.
No commission can be paid on the new regular payments.
Client must agree remuneration with their adviser for this element of their portfolio.
Recommendation of a lump sum investment.
No commission can be paid on the lump sum investment.
Switch recommendation from one fund to another.
No commission can be paid on the fund switched into.
This covers all products i.e. bonds will not be treated differently to ISAs.
Recommendation to move investments from one platform and re-register onto another platform is unlikely to be advice as it normally won't involve buying and selling the investment held on the platform.
Commission can remain being paid on the re-registered assets.
Dividends are re-invested into an investment without advice being given.
Commission can be paid on the re-invested amount.
No change to adviser remuneration, no new charging for client to agree to.
Although we welcome the clarity provided by the by the Consultation Paper, we feel there are still some significant questions to be answered and time is passing fast for the industry to be able to react and prepare for the significant change this will bring.
We support the general thrust of what the FCA is seeking to achieve, including its stance on treating advice on funds in a life policy in the same manner as other product wrappers such as ISAs - this will ensure that product bias is removed.
We'll be pressing the FCA for further clarity on a number of issues. We're also increasingly concerned with how the re-registration rules are going to work in practice.
Cofunds Limited is authorised and regulated by the Financial Conduct Authority FCA Registration No 194734.
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