‘Sunset clause’ could solve legacy commission issue, says Skandia

SunsetInvestment platform Skandia is calling for a 'sunset clause' on commission received by advisers from legacy products after the implementation of the retail distribution review (RDR).

Under this arrangement, advisers would continue to receive legacy commission for a set period of time in order to allow the industry to make a more orderly transition to the new adviser-charging model.

The Financial Services Authority (FSA) is currently considering whether to make a distinction between non-insured and insured products, the latter possibly allowing legacy commission to be paid.

Skandia believes that this would create an uneven playing field, which could lead towards product bias among advisers, while scrapping legacy commission outright could result in customers having to switch or take out new products, losing existing policy benefits and incurring extra charges.

Peter Mann, chief executive at Skandia UK, said: “Our view is that the RDR aims of fairness, clarity and consistency will actually be better served by a pragmatic decision to apply a ‘sunset clause’ to the payment of legacy commission. Allowing legacy commission to disappear over an extended period, rather than in haste, will enable the industry to make a more orderly transition to adviser charging.”

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