Legacy commission remains key revenue driver for advisers in post-RDR world

3 June 2013

New research from Avelo, the UK’s leading financial services technology solutions provider, has revealed that despite investing heavily to deliver on RDR commitments, legacy commission still accounted for on average 52.6% of adviser income in the first three months after RDR day. The poll was carried out as part of the Avelo Experience roadshows in May 2013.

When asked specifically about their current reliance on legacy commission fewer than one in five advisers (17%) said that under 25% of their firm’s income came from this route in Q1, while almost one in two (44%) believed the majority of their Q1 income was from non-fee paying clients. The majority foresee a reduced reliance on this source of income as the year progresses – by end of Q2 just 40% of advisers anticipated gaining more than 50% of their income from legacy income down 4% on Q1 figures – but this sounding still suggests that full transition to post RDR charging is a long way off yet.

The survey also paints a clear picture of just how much time and money advisers have invested in order to meet new reporting requirements put in place by RMAR. So for example, almost one in four ( 23.4%) spent more time discussing products with providers to clarify pre-RDR trail commission and the post-RDR charging structure, while more than one in 10 (11.2%) have spent more time seeking guidance from the FCA. Many firms have also made significant financial investments too. 24.3% of respondents have invested in new systems and technology to help with the changes. 20.4% have invested in further training, while 9% have invested in help from external consultancies to adapt.

Sophie Hall, Head of Intermediary, at Avelo commented: “Advisers have yet to feel the full impact of RDR on their revenues. Legacy commission is still making up the lion’s share of income in many firms, and the financial effects of new charging structure will become clearer as the year progresses.

“However, the new reporting requirements put in place have already had tangible influence on processes, and advisers have had to invest both time and money to understand and adapt to the RMAR. Technology is playing – and will continue to play – a vital role in this ongoing transition, whether helping advisers meet new reporting criteria, or enabling them to analyse their business models and target their core client base more effectively.”

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