Kim North managing director of Technology & Technical was at this month’s Personal Finance Society conference and spoke to many of the top IFA's. It was good to hear that other top IFA's like Enable of Bishop’s Stortford are generally optimistic about business but she spotted a couple of general frustrations with some of the new rules not matching the real world.
She noted that “The regulator issued another draft guidance paper last week covering legacy commission. It sets out whether various situations will amount to advising on investments under article 53 of the regulated activities order. It contains a rather interesting table explaining when commission can be taken or not when advising on investments.”
“This makes little sense to me” she said “as where a client receives no advice on their investments, the adviser can receive trail commission but where advice is provided on the investments clients may have taken out previously, the adviser cannot receive any trail commission. Does the FSA understand that trail commission does not affect investment advice as trail is paid by the majority of investment funds and products? Trail helps with cash flow for adviser businesses and advisers work hard to keep existing clients and attract new clients with previous investments to bring together a portfolio under the advice of one professional IFA. If existing investments are not advised upon, what happens if the fund manager or team leaves or the fund starts to underperform? Surely advisers should have incentives to provide regulated advice on legacy business.”
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