Those affected will be IFAs who advised business held directly with SLI before 1 January 2013.
SLI believes that the changes will align the way the company treats legacy and new business.
Some have accused SLI of engineering the change to enable them to pocket the difference, as the changes will see charges fall but not at the same level as commissions.
The letter states that the changes reflects “the spirit of the Retail Distribution Review”.
Client confirmation
In a similar letter to clients, SLI confirmed that the firm will no longer pay renewal commission to IFAs and advised that the charges paid by investors will fall.
The changes will affect around 90,000 clients, whose ongoing charges are expected to drop by between 20bps and 30bps.
Annual management charges are typically being cut by around 20bps, with current renewal commission of 25bps on bond-type funds and 50bps on equity-type funds.
The ongoing charges figure (OCF) paid by investors across the entire retail class of share will, as a result, fall.
Anomalies and inconsistencies
In a statement, SLI advised: “Regulatory change has created anomalies and inconsistencies in relation to how investors pay for financial advice on new and legacy (pre January 2013) UK regulated business. These anomalies will become more pronounced with the implementation of the FCA rules in April 2016.
“In response to this, we have taken the decision to stop paying renewal commission on all business held in our retail class of shares from April 2016. We believe this best reflects the evolving regulatory environment and creates consistency for our clients regardless of when they made their investment.”
Biased
Unless there is some information that hasn’t yet come to light, the move by SLI is unfair, illogical, and commercially biased in their favour, according to David Howell, chief executive of Guardian Wealth Management.
Speaking to Portfolio Adviser’s sister publication, International Adviser, Howell said that it looked like SLI was “using the spirit of RDR to cover their own costs”.
