Glossary · fee
Retrocession
Also known as: kickback, trail commission, inducement
- Definition
- A retrocession is a payment from a product manufacturer (fund manager, structured-product issuer) to the distributor (private bank, IFA, EAM) for arranging the sale or holding the product on the platform.
Retrocessions create a conflict of interest because the distributor is paid by the manufacturer rather than (or in addition to) the client. Post-2008 reform globally moved disclosure of retrocession to the client and in many jurisdictions banned the structure for retail advisory. Singapore's Financial Advisers Act and section 23B in particular are read by counsel as restricting retrocession-like arrangements in advisory contexts. Most EAMs and fee-only advisers operate on a no-retrocession basis explicitly.
Source: FAA s23B
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