This weekend’s BBC Radio 4 Moneybox programme contained a piece on the subject of “trail commission”.
It was stimulated by the launch of yet another service that offers to rebate to clients the fund based renewal commission (or at least a large percentage of it) typically payable by financial services product providers to intermediaries.
Leaving aside some of the inaccurate bits of “puff” coming from the person launching the new service, some IFAs have seen the broadcast as a direct attack on their integrity.
The suggestion is that consumers are paying a large amount of the value of their hard earned pension fund in trail commissions to their adviser who is, put simply, then failing to deliver a service to them.
Like with all good stories there is an element of truth in some of this but equally a lot which is simply not true.
Some consumers are probably paying renewal commissions to their advisers in respect of products that they have previously purchased and for whatever reason do not receive an on-going service.
Some IFAs will argue that in order to receive this renewal payment they took less initial commission in the first place and this argument does indeed have some merit – as long as this was properly explained and documented to the client when the plan was first set up.
Other IFAs argue that they do indeed provide a meaningful ongoing advice service to their clients and this is also very true.
Certainly the vast majority of IFAs that we know are keen to maintain a long-term relationship with their clients and meet and communicate with them on a regular basis.
The Telegraph on Saturday contained a good article on this subject and I was pleased to contribute to it.
Certainly we would argue that every consumer needs to search for value and that if they do not believe that they are getting the service they deserve from their adviser the sensible thing to do would be consider moving to an adviser who does offer the service they want.
This isn’t always easy but frankly it should be.
Every competent adviser these days issues an “engagement letter” to their prospective clients. That letter should set out exactly what you get and what you pay for an on-going service.
There simply is no excuse for not knowing what you pay your financial adviser and what you get in return.
Today the front page of the Daily Express has added a lot of fuel to the fire, with an in your face headline – “Pension pots slashed by 75% millions may be victims of “rip-off” financial advisers”.
Now we all know that the media loves a good negative story but this should not detract us from the reality of the situation.
Just like any other form of consumer, financial services clients should be able to see the important differences between price and value. If you are concerned that you are paying for something that you are not receiving then the sensible thing to do would be to discuss this with your adviser and seek understanding and, where applicable, resolution.
