27th January 2014
Safeguarding the future of your business – Life after Trail
As many of you will be aware, earlier this month, in conjunction with New Model Business Academy, Panacea Adviser hosted a panel debate examining how advisers will fare once the end of trail commission comes into play and how advisers can prepare for the future of their business.
Our game panel of industry experts were:
- Keith Richards, CEO, The PFS
- Neil Stevens, Managing Director, Simply Biz
- Chris Hannant, Director General at APFA
- Garry Heath, former Director General of the IFA Association
- Mike Morrow, Sales & Marketing Director, Ascentric
and, as you can imagine, a very healthy debate ensued.
While the panellists had clearly done their homework – examining exactly what the regulator has announced on the decision to cut trail and what will and will not need to be changed with regards to advisers’ charging structure; as the event progressed, it became abundantly clear that there were still many questions to be answered and a lack of clarification about the (un)intended consequences of this stoppage.
From April 2016, all legacy payments between fund managers and platforms will be banned and the panel agreed that trail commission as we now know it, will eventually end. Indeed, the CEO of the Personal Finance Society, Keith Richards was refreshingly honest in his statement that it is, “wholly wrong, where trail was part of the initial commission, for anyone to take that away.” Keith added that if a client needs ongoing service, the adviser will be left with no choice but to either work for free, or risk charging the client twice. The possibility of consumer detriment in this instance is all too real.
It quickly became apparent that switching off trail will not only impact advisers, but could also create servicing problems for providers. For providers who have relied on intermediated distribution, there will no longer be a servicing adviser, meaning that providers are likely to be inundated with any queries or comments or requests for advice.
However, perhaps as testament to the resilience of our industry, this was not simply an exercise in despair. Our panel was united in the need to overcome this change in regulation and, as we have so many times in the past, to work together to create a stronger industry in spite of the difficulties. SimplyBiz MD, Neil Stevens, urged advisers to use the next two years to effectively communicate these changes to their clients and to develop their business model to flourish in the (next) ‘new world’. Similarly, while Lee Travis, CEO of the NMBA agreed that we still need the regulator to provide clarity around the rule changes and that there are undeniably challenges for the market to face, these developments should, ultimately, aid our industry – helping to control costs and encourage new entrants to join the market.
At the end of the day, whether, like Garry Heath, former Director General of the IFA Association you view the end of trail as, “legalised theft” or like Mike Morrow, Sales and Marketing Director at Ascentric believes, that ongoing adviser charging will help the industry move forward, the fact remains that our profession is due for an overhaul yet again.
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