Effective from April 2016, the sunset clause will see significant changes to the way advisers charge clients for their services; all revenue having to be passed on to clients as either taxable unit rebates or ‘clean’ shares – as agreed with the clients – with the majority of firms subsequently looking to phase out trail commission and AMCs for unbundled fees.
However, while 52% of the 89 firms surveyed said that at least three-quarters of their platform-based revenue comes from fees, with nine months until the deadline 83% are still in the process of moving clients to fee arrangements.
Furthermore, despite 56% of participants indicating that they will achieve their client transfers by the end of 2015, almost a fifth said that they are intending to wait until deadline before doing so, while 34% are still seeing more than half of their revenue in the form of trail commission.
Jon Everill, head of advisory services at FundsNetwork, said that while the majority of firms are making tracks ahead the sunset deadline, for others results are yet to be seen.
“For some firms there is still work to do,” he said. “This is a hard and fast FCA-imposed deadline and people have had quite a lot of notice. But on balance a lot of firms are ahead of the game and there is still another quarter to go before deadline – the firms that have a plan of what they want to do and how to accomplish it should get there before deadline.
“Most advisers feel confident that they are making informed decisions about what they need to do and which clients they need to see, and are well into the process of getting it done.”
The FundsNetwork report supports an Investec survey conducted in 2014 revealing that four in five intermediaries expect some of their industry counterparts to miss the deadline.
That said, the impending sunset clause has already had a discernible effect among advisors, with 57% generating less than a quarter of their revenue from trail commission.
This progress translates in positive advisor sentiment around the ease of implementing the changes, with 83% of firms agreeing that they feel well-supported by their respective platforms when transitioning clients from trail commission to fees.
