Trail Commission on Unit Trusts purchased pre-RDR

Elmet

Hi all, long term "lurker" but first post here!

I recalled seeing an article in the FT a while back to the effect that the FCA value rules could spell the end of trail commission, but have seen nothing further since.

However, I have recently been advised by Invesco that they will stop paying all commission from later this year. I wonder if other funds providers will follow suit? Has anyone else seen anything on the subject?

dunstonh

I recalled seeing an article in the FT a while back to the effect that the FCA value rules could spell the end of trail commission, but have seen nothing further since.

The FCA consumer duty rules are interpreted in different ways.      The FCA themselves have said nothing on trail commission.

However, I have recently been advised by Invesco that they will stop paying all commission from later this year. I wonder if other funds providers will follow suit? Has anyone else seen anything on the subject?

All commission would mean the introduction of a platform/provider charge to replace the platform commission.   Which, in the cases of the fund houses that have long turned off trail commission, has seen the same platform charge as their commission.  Often a higher charge than an independent platform.

You have been able to turn off adviser commission since 2013.   Just not the platform commission.

The comeback question, if you are still on dirty share classes, is why?   You haven't needed to be for over 11 years (requirement was 2013 clean share classes were available before the 2013 rule change)

Elmet

Thought I'd come back and update this in case it's of interest to anyone.

I came across this while helping a widowed friend sort out some financial issues, and she, as well as other people I know, certainly did still have "dirty" holdings.

The Invesco mention actually came up initially in a letter from Commshare (who I think have been mentioned on here previously in trail commission related threads). Basically they were trying to get people to sign up to a fee based arrangement to replace the imminent loss of trail.

I checked out the position with Invesco and they are indeed ceasing commission from the end of July 2024 (the customer can obviously bring it forward it they wish). I've still not seen mention of it elsewhere (other than in their recently revised terms of business for advisers), and Invesco did not disclose any plans to publicise it, though they were very relaxed talking about it. I have holdings with Invesco, but they're in "clean" classes so they may have contacted clients likely to be affected, for all I know.

Also contacted the FCA, who were well aware of Invescos action and asked them if a) they were aware of any other providers following suit and b) if they had any intention of finally closing this loophole. The reply was polite but non-commital, but interestingly stopped short of an outright "no".

So we proceeded to move holdings in Invesco and other funds to "clean" classes. Now, some years back, while helping another friend in similar circumstances, the process of switching funds and removing "advisers"from the relevant funds, was akin to root canal work.

This time, it was very much "pushing at an open door" - UT providers seemed very keen to move customers to "clean" classes and delete advisers from the relevant accounts.

 Another friend has recently received a letter from another UT provider which states "As part of an ongoing review we are planning the changes outlined in this letter to provide the best customer outcomes. We have identified that you are now eligible to move to a share class with a lower management fee." 

(The lower fee is in fact 0.5% lower (ie the typical trail commission) and the change will take place automatically in 60 days unless cancelled by the customer.)

dunstonh

The Invesco mention actually came up initially in a letter from Commshare (who I think have been mentioned on here previously in trail commission related threads). Basically they were trying to get people to sign up to a fee based arrangement to replace the imminent loss of trail.

That is because pre 2013 method included two types of commission.  One of which went to the platform.     Post RDR, the platforms had to charge explicitly.  And in many cases, the amount platforms charged actually went up.  (the platform commission was typically around 0.15-0.25%)

I checked out the position with Invesco and they are indeed ceasing commission from the end of July 2024 (the customer can obviously bring it forward it they wish). I've still not seen mention of it elsewhere (other than in their recently revised terms of business for advisers), and Invesco did not disclose any plans to publicise it, though they were very relaxed talking about it. I have holdings with Invesco, but they're in "clean" classes so they may have contacted clients likely to be affected, for all I know.

My understanding is that they are retaining platform commission and changing the share class to non-trail.   They are not moving people to the clean share class.  However, I have only given it a cursory glance.

Also contacted the FCA, who were well aware of Invescos action and asked them if a) they were aware of any other providers following suit and b) if they had any intention of finally closing this loophole. The reply was polite but non-commital, but interestingly stopped short of an outright "no".

They cannot say no because they wouldn't necessarily be aware of  what other fund houses may or may not do.

So we proceeded to move holdings in Invesco and other funds to "clean" classes. Now, some years back, while helping another friend in similar circumstances, the process of switching funds and removing "advisers"from the relevant funds, was akin to root canal work.

Its been a doddle since 2013.

This time, it was very much "pushing at an open door" - UT providers seemed very keen to move customers to "clean" classes and delete advisers from the relevant accounts.

Doing something you request is not the same as keen to do it.  However, the fund houses remain financially better off if you just turn off trail but remain on the dirty share class.

 Another friend has recently received a letter from another UT provider which states "As part of an ongoing review we are planning the changes outlined in this letter to provide the best customer outcomes. We have identified that you are now eligible to move to a share class with a lower management fee." 

(The lower fee is in fact 0.5% lower (ie the typical trail commission) and the change will take place automatically in 60 days unless cancelled by the customer.)

So again, they are only turning off the trail commission.  Not the platform commission, which they are retaining.