As an IFA, the issue of fee based remuneration, along with the treatment of renewal commissions on your clients’ fund holdings post RDR, will no doubt have been high on your agenda for some time.

Clarity on the implications for IFAs’ business and income model is constantly improving as 2013 approaches, albeit the issue remains something of a moveable feast, with the FSA still tweaking and reinterpreting various aspects of RDR, most recently with the introduction of transitional arrangements for legacy commission arrangements.As you will know, in its last quarterly consultation document it noted that concern has been expressed over adviser charging rules that do not permit continued payment of trail commission on legacy business in place before 2013.

In response it has clarified its stance and added a transitional rule to confirm that legacy commission can continue to be paid ‘in accordance with the contractual terms originally agreed between the provider and the adviser’.This is of course helpful……up to a point, and for a period at least will preserve income streams derived from fund renewal. The key phrase of course, is “for a period”. Once an IFA advises on, or effects investment changes on behalf of a client, post RDR, it seems that the investment will no longer be subject to the transition rule and the IFA will not be able to take remuneration in the form of renewal. The bottom line is that, short of not doing anything (a course of action which in itself would carry weighty compliance risks), income streams from fund based renewal will diminish.

There are of course a number of fee based options to be considered in order to overcome this growing shortfall post RDR, and no doubt you will have considered many, if not all during the course of your RDR planning.

One particular solution which you might wish to consider, and which seems to have attracted very little comment or attention to date, is the scope for fee sharing arrangements with a discretionary fund manager.

Research into this area confirms that the receipt of a share of investment management fees from a DFM will  continue to be allowed post RDR as they are subject to client agreement, clearly identifiable to the client are therefore in accordance with the principles of customer agreed remuneration.Mercater has agreements in place with many third party providers who offer a variety of investment wrappers. If you feel we could help your business as RDR approaches please do not hesitate to contact us.

Tim Haynes
Business Development Manager                                                                

Whitehead House
Pacific Road
Altrincham
Cheshire
WA14 5BJTel:   0161 926 7150
Mob: 07894 935240 

Comments are closed.