Barclays: Legacy trail may create moral hazard over fund switches

Legacy trail commission may create a "moral hazard" in which advisers encourage investors to stay in investments longer than they should, analysts at Barclays have warned.

A much anticipated mass exit of IFAs in the first quarter of this year due to the implementation of the Retail Distributions Review (RDR) is unlikely, according to the analysts, but they expect a "continuous decline" of the sector over the next two to three years. The uncertainty of legacy trail commission - and the "moral hazard" it may create - is likely to be a particular catalyst for departures, said the analysts. "IFAs will be able to exist off legacy trail commission on those investments where they provided no new advice after 1 Jan 2013. This income can sustain them for some ti...