Apfa says the FCA is “irresponsible” for floating the idea of switching off all pre-RDR trail commission and questioned whether the regulator would have the legal power to unravel existing contracts.
Minutes from the FCA’s June board meeting, published last week, flagged “whether the lack of end-date for the payment of trail commission on pre-RDR business might lead firms to act in ways that risked poor consumer outcomes,” as an area of concern.
Apfa director general Chris Hannant says this is a “knee-jerk reaction” to initial findings from the FCA’s small thematic review last month into RDR implementation.
He says: “We are barely seven months into the RDR, and for the FCA to start recklessly talking about re-writing the rules is slightly over the top. The FCA needs to understand it has to provide a stable framework for people to do business. Quite frankly, there are bigger risks and the regulator has a long documented record of missing most of them.”
Hannant says ongoing payments will often have been part of legal contracts set up when the advice was given.
He adds: “To change that would be unpicking that contractual arrangement. I do not know whether it is clear the FCA can do that. The regulator cannot tell firms to go ahead and rely on these payments and then threaten to remove them months later. It is ridiculous and irresponsible.”
Thameside Wealth director Tom Kean says: “It is outrageous the FCA is considering rewriting the rules like this. It is because the regulator’s RDR thinking has been so woolly and ill-thought through that gremlins like this are now coming out of the woodwork.”
The FCA declined to comment.