The Association of Financial Advisers (AFA) has sought to give its members a guide to whether they can convert at least some elements of grandfathered commissions into to adviser service fees, provided it is in the best interests of their clients.
The AFA has published what it has labelled a “Grandfathered Commission Decision Tree” and has stated, using the flow-chart, financial advisers who have grandfathered commission clients will need to undertake a detailed assessment and then carefully consider what action is in the best interest of their clients.
The flow chart/decision tree then asks key questions about the products from which grandfathered commissions have been derived to determine whether an arrangement needs to be cancelled either now or in the future or whether it can be negotiated into an adviser service fee (ASF).
In a number of scenarios within the decision tree, advisers appear to have the option of turn off trailing commissions and discussing with clients the possibility of moving to an ASF.
The starting point for the decision tree is whether a product is broadly competitive and a key element appears to be whether, in any case, “is the client viable for an ASF”.