Ed Dymott: Trail Commission Isn’t the Problem

Why It Matters

A pure trail‑commission ban could worsen consumer costs unless regulators also dismantle the structural barriers keeping legacy policies locked in, which hampers competition and transparent pricing in the advice market.

Key Takeaways

• Over £200bn ($250bn) locked in legacy insurance with trail commissions
• Trail commissions represent a shrinking share of advisers’ overall revenue
• Banning trail alone may leave consumers paying higher product fees
• Real reform requires tax‑neutral transfer mechanisms for legacy policies
• Unlocking legacy capital would spur competition and reduce overall costs

Pulse Analysis

The FCA’s latest consultation on banning trail commissions revives a debate that began with the 2012 Retail Distribution Review (RDR). RDR’s fee‑based model was intended to eliminate opaque, ongoing payments to advisers, yet more than $250 billion of legacy insurance and with‑profits funds still generate small, residual trails. These commissions persist because the underlying products are bound by tax rules and contractual structures that make transfers costly or impossible. As a result, advisers are forced to service outdated policies that offer poor value, while the industry debates whether removing the trail alone will improve outcomes.

The core issue, according to Benchmark Capital CEO Ed Dymott, is structural inertia rather than the commissions themselves. Legacy policies remain on the books because moving them would trigger tax charges, and providers have little incentive to lower fees if the trail is simply stripped away. A ban could therefore shift the cost burden onto consumers, who would face unchanged product charges plus new advisory fees. To truly align with the consumer‑first intent of RDR, regulators must enable a tax‑neutral wrapper‑to‑wrapper transfer process, allowing policyholders to migrate to modern, lower‑cost solutions without fiscal penalties.

If such transfer mechanisms were introduced, the market would see heightened competition among insurers, driving down charges and improving service quality. Providers would need to price products on current risk assumptions rather than relying on legacy persistency, potentially accelerating the natural decline of trail commissions. For advisers, transparent fee structures would replace hidden trails, fostering clearer client relationships. Ultimately, unlocking legacy capital could deliver the dual benefit of better consumer outcomes and a more dynamic, competitive financial‑advice ecosystem.