Over 50% of advisers are unprepared for the end of trail commission, according to new research conducted by Panacea Adviser, the online community and resource for financial advisers and paraplannners.
Panacea says that its survey showed a majority of its respondents feeling unprepared and unsure of what steps to take. More than 75% of the advisers questioned feel that there has been a lack of clarification on the definition of the removal of trail commission, and on which products will be affected. Will it, for instance, also affect investment bonds and pensions? Many believe there has been an absence of clear communication from the Financial Conduct Authority (FCA).
Panacea says that its research suggests that the biggest impacts on the adviser community and their businesses will fall not only from a reduction in profit, but also from increased costs to clients. 90% of the advisers polled believe that the end of trail commission will not enhance the outcomes to clients – and ,in fact, that it could result in some clients, particularly those who have less to invest, being unable to afford any advice or guidance – which was historically funded through trail commission.
Mark Cooke, Financial Adviser, MSC Financial Services commented: “I am a small sole trader and have built up a large trail to help run a business model that can service all types of clients – even those who cannot now afford the fees I have to charge. The main point I see is that the removal of trail from investments leaves clients still paying the same annual management charge but now having to pay a fee on top – this is surely a major consumer detriment.”
Derek Bradley, Chief Executive Officer, Panacea Adviser said: “Our research has clearly shown that the removal of trail commission is not fully understood by financial advisers and the overwhelming lack of clarity has meant they are simply not ready for this industry upheaval. Many advisers have stated that they feel this rule change is an injustice and that contractual agreements that have been in place for years have been set aside without any consultation with the adviser community.
“Panacea Adviser is now working towards making the end of trail process clearer and helping advisers through this transition period. We have met with the FCA to open the dialogue between advisers and regulators and create better communication between the two. Following this meeting Panacea will soon be releasing a guide to help get businesses ready for life after trail.”