In total the regulator published three RDR-related notes aiming to clarify issues surrounding trail and legacy commission and distributor-influenced funds.
In them it said intermediaries will be able to continue receiving trail commission on products advised on before 30 December 2012 and if the product is retained post-RDR.
But it did not budge on its legacy commission stance from earlier consultation papers, which banned the payment of it for the advised sale of incremental top-ups in, for example, a unit trust.
By legacy assets the FSA means retail investment products bought before RDR rules come into effect on 31 December, and which the client is still holding when the rules come into force.
Clear up confusion
There has been some confusion among intermediaries as to what would happen with trail and legacy commission on pre-RDR products still held by an investor, including instances of changes or additions to the product or investment post-RDR.
The FSA said in its policy statement: "The RDR rules will prevent the payment of commission for new advice and we confirmed we do not propose to relax this ban. Our supervisory work will review the implementation of the new adviser charging rules, and will monitor changes in the market leading up to the implementation of the rules at the end of this year.
"This will include monitoring changes in the market pre-RDR such as significant increases in the sale of particular products that could indicate non-compliance with the rules on suitability and the client’s best interests."
Another matter the FSA will be keeping tabs on is whether firms are recommending the retention of higher charging products so they can continue to receive trail commission.
Distributor-influenced funds
In a further factsheet the FSA aimed to set out for distributors with their own range of "distributor-influenced" funds or those planning to introduce one what they should consider when adopting them.
The crux of the regulator’s concern with these funds is "you [firms] must ensure they are suitable for each client and do not simply complexity and costs".
It said firms offering them should:
- employ staff competent to work with these products;
- manage conflicts of interest effectively;
- ensure the product is suitable for each client to whom it is recommended; and
- analyse the impact of charges and disclose this to clients.
