The FSA has today issued guidance on how product providers, platforms and advisers should decide whether payments into products after 1 January 2013 are ‘legacy' business (so trail commission can continue to be paid) or are subject to the post-RDR rules.

Commenting on the guidance, Julie Patterson, Director of Authorised Funds and Tax at the IMA, said:

"We welcome the clarity provided by the new guidance for some common scenarios. These include top-ups to existing investment when new advice is given, and automatic changes to investments due to a portfolio rebalancing or investment increases agreed before the end of 2012.

"We are very disappointed, though, that the new guidance expressly allows investments underlying a life product to change and not be subject to the new RDR rules, even where new advice has been given. This will lead to distortions in the marketplace, about which we have consistently raised concerns.

"it is also disappointing that the FSA has decided not to include in the guidance explicit recognition that product providers and platforms can only act on the basis of instructions from advisers.

"We note that the FSA has decided not to introduce at this stage a sunset provision, whereby all trail commission would cease, after, say, 5 years. However, we welcome the commitment to monitor developments in the marketplace to act if trail commission levels do not reduce."