Commission paid for 15 years after IFA changed
Discussion
This is interesting.
In 1999 I used an IFA we shall call 'A', and they sold me a Standard Life OEIC. In approx 2001 I changed IFAs from 'A' to 'B', and as far as I was aware 'B' had taken over authority and advised on the product.
Last week I sold the OEIC and whilst sorting out the paperwork found the original commission disclosure notice from IFA 'A'. It states 'Commission of 0.50% of the value of your contract on each anniversary will be paid for the lifetime of the contract thereafter’. Hmm... Could there possibly be any chance that 'A' has been receiving commission in error for 15 years?
I phoned Standard Life. They had indeed been paying 0.5% every year to IFA 'A', saying that no-one had advised them otherwise. They won't help me recover it, but are going to send me a transactional history so I'll know the dates and amounts.
I have had no contact with IFA 'A' since 2001 and IMHO they should not have received commission after that date. It seems they have been accepting it but not telling me or doing anything for it.
Am I entitled to get this commission back and if so what is the best way to achieve it? A nice letter to 'A'? They are still trading. There is also the matter of reduction in yield...
Hopefully this will have an easy answer!
In 1999 I used an IFA we shall call 'A', and they sold me a Standard Life OEIC. In approx 2001 I changed IFAs from 'A' to 'B', and as far as I was aware 'B' had taken over authority and advised on the product.
Last week I sold the OEIC and whilst sorting out the paperwork found the original commission disclosure notice from IFA 'A'. It states 'Commission of 0.50% of the value of your contract on each anniversary will be paid for the lifetime of the contract thereafter’. Hmm... Could there possibly be any chance that 'A' has been receiving commission in error for 15 years?
I phoned Standard Life. They had indeed been paying 0.5% every year to IFA 'A', saying that no-one had advised them otherwise. They won't help me recover it, but are going to send me a transactional history so I'll know the dates and amounts.
I have had no contact with IFA 'A' since 2001 and IMHO they should not have received commission after that date. It seems they have been accepting it but not telling me or doing anything for it.
Am I entitled to get this commission back and if so what is the best way to achieve it? A nice letter to 'A'? They are still trading. There is also the matter of reduction in yield...
Hopefully this will have an easy answer!
Simpo Two said:
This is interesting.
In 1999 I used an IFA we shall call 'A', and they sold me a Standard Life OEIC. In approx 2001 I changed IFAs from 'A' to 'B', and as far as I was aware 'B' had taken over authority and advised on the product.
Last week I sold the OEIC and whilst sorting out the paperwork found the original commission disclosure notice from IFA 'A'. It states 'Commission of 0.50% of the value of your contract on each anniversary will be paid for the lifetime of the contract thereafter’. Hmm... Could there possibly be any chance that 'A' has been receiving commission in error for 15 years?
I phoned Standard Life. They had indeed been paying 0.5% every year to IFA 'A', saying that no-one had advised them otherwise. They won't help me recover it, but are going to send me a transactional history so I'll know the dates and amounts.
I have had no contact with IFA 'A' since 2001 and IMHO they should not have received commission after that date. It seems they have been accepting it but not telling me or doing anything for it.
Am I entitled to get this commission back and if so what is the best way to achieve it? A nice letter to 'A'? They are still trading. There is also the matter of reduction in yield...
Hopefully this will have an easy answer!
I think the easy answer is no, you are not entitled to anything.In 1999 I used an IFA we shall call 'A', and they sold me a Standard Life OEIC. In approx 2001 I changed IFAs from 'A' to 'B', and as far as I was aware 'B' had taken over authority and advised on the product.
Last week I sold the OEIC and whilst sorting out the paperwork found the original commission disclosure notice from IFA 'A'. It states 'Commission of 0.50% of the value of your contract on each anniversary will be paid for the lifetime of the contract thereafter’. Hmm... Could there possibly be any chance that 'A' has been receiving commission in error for 15 years?
I phoned Standard Life. They had indeed been paying 0.5% every year to IFA 'A', saying that no-one had advised them otherwise. They won't help me recover it, but are going to send me a transactional history so I'll know the dates and amounts.
I have had no contact with IFA 'A' since 2001 and IMHO they should not have received commission after that date. It seems they have been accepting it but not telling me or doing anything for it.
Am I entitled to get this commission back and if so what is the best way to achieve it? A nice letter to 'A'? They are still trading. There is also the matter of reduction in yield...
Hopefully this will have an easy answer!
Typically, when you took out the product initially, you would have had a choice of paying the IFA commission upfront or a reduced amount upfront with an ongoing charge.
It seems you chose the latter, possibly recommended by the IFA?
Many of these policies last only a few years, hence the IFA receives much less than anticipated. Conversely the odd few, like yours, will last 15 years and the IFA will do very well.
At any point you could have transferred your money to a new product and then the payments would have ceased.
sidicks said:
Typically, when you took out the product initially, you would have had a choice of paying the IFA commission upfront or a reduced amount upfront with an ongoing charge.
It seems you chose the latter, possibly recommended by the IFA?
It was both, 3% initial and 0.5% renewal.It seems you chose the latter, possibly recommended by the IFA?
IFA 'A' knew he was no longer the appointed IFA but kept taking the loot. Should it not have been sent to IFA 'B' who had the responsibility of advising on it? Perhaps 'B' forgot to contact SL or SL failed to act on it?
ETA I have a couple of other investments for which he may still be getting paid. Can I switch it off?
Edited by Simpo Two on Monday 23 May 13:29
Simpo Two said:
It was both, 3% initial and 0.5% renewal.
As above, this was a reduced initial commission. Full initial commission with 0% FBRC would have been around 6% depending on the IFA.Very roughly therefore you can see that the average length of investment was expected to be around 6 years.
Simpo Two said:
IFA 'A' knew he was no longer the appointed IFA but kept taking the loot. Should it not have been sent to IFA 'B' who had the responsibility of advising on it? Perhaps 'B' forgot to contact SL or SL failed to act on it?
The commission is in respect of the product already purchased and therefore belongs to IFA 'A'.Did you ask IFA 'B' to review this investment? Did he charge you a fee for this review?
That's not how it works. Even if you didn't have an appointed IFA you'd still pay the commission (as its part of the total annual charge you pay), but Standard Life would have kept it for themselves.
IFA B has cocked up by not getting the commision transferred to them, but IFA A has done nothing wrong. That's basically how the IFA business worked for a very long time before it was reformed a couple of years ago.
Sorry, but you have zero chance of getting your hands on that commission.
IFA B has cocked up by not getting the commision transferred to them, but IFA A has done nothing wrong. That's basically how the IFA business worked for a very long time before it was reformed a couple of years ago.
Sorry, but you have zero chance of getting your hands on that commission.
sidicks said:
As above, this was a reduced initial commission. Full initial commission with 0% FBRC would have been around 6% depending on the IFA.
Fair enough.sidicks said:
The commission is in respect of the product already purchased and therefore belongs to IFA 'A'. Did you ask IFA 'B' to review this investment? Did he charge you a fee for this review?
My view of things pre-RDR was that the IFA was expected to oversee/advise on the product for which he received income. As various funds were transferred to the aegis of IFA 'B' I signed forms so they could take each one over. Maybe this one got missed. I can't remember either IFA ever advising me on the OEIC anyway, and over the 16 years, it made 3.4% net.CaptainSensib1e said:
IFA B has cocked up by not getting the commision transferred to them, but IFA A has done nothing wrong. That's basically how the IFA business worked for a very long time before it was reformed a couple of years ago.
OK so we have two possibilities here. Either the commission is a 'sales' commission, in which case IFA 'A' should have it for ever because they sold it, or it's a fee for advising, in which case IFA 'B' should have had it. They can't both be entitled to it!I know the financial services industry operates in its own world but it does seem odd that a salesman can keep having commission decades after he's sold a product, or that someone can be paid and not do anything in return for it.
BTW IFA 'A' also sent an annual bill in too - and that was long before RDR!
Simpo Two said:
OK so we have two possibilities here. Either the commission is a 'sales' commission, in which case IFA 'A' should have it for ever because they sold it, or it's a fee for advising, in which case IFA 'B' should have had it. They can't both be entitled to it!
Isn't it an advisory commission in BOTH cases?"A" gets it until you switch out either to a new investment or to a new advisor or both.
If "B" had advised to you stick with the OEIC then he would be getting the commission on an ongoing basis.
walm said:
Isn't it an advisory commission in BOTH cases?
"A" gets it until you switch out either to a new investment or to a new advisor or both.
If "B" had advised to you stick with the OEIC then he would be getting the commission on an ongoing basis.
I could understand a split such that 'A' gets 3% for selling it and then later 'B' gets the 0.5% annually for 'advising' on it, but Standard Life told me it had been paid to 'A' for the whole 16 years - because they hadn't received any instruction to do otherwise. I can't fault them for that, and of course valuation statements never say 'Payment to IFA: £x', it's spirited away invisibly."A" gets it until you switch out either to a new investment or to a new advisor or both.
If "B" had advised to you stick with the OEIC then he would be getting the commission on an ongoing basis.
As Captain Sensible says, it looks like 'B' was the adviser but 'A' got the money. So if 'A' wasn't the adviser they weren't entitled to it...
In total agreement with your thinking, but its what the contract says nothing more nothing less.
A would not give up the commission, why should they? The contract says it's theirs for the life of the contract, from what you've posted.
B have no absolute right to the commission as the contract says it was at the point of sale that this was determined. They could try and get it moved to themselves, but may not get it anyway (see below)
The provider? Some companies used to be able to transfer servicing commissions to a new servicing agent, some couldn't/wouldn't. If you asked for A to be removed as you no longer had any dealsing most typically kept it for themselves.
I really wouldnt lose any sleep over it, not much you can do from what I know. I'd still be a little bit miffed mind.
A would not give up the commission, why should they? The contract says it's theirs for the life of the contract, from what you've posted.
B have no absolute right to the commission as the contract says it was at the point of sale that this was determined. They could try and get it moved to themselves, but may not get it anyway (see below)
The provider? Some companies used to be able to transfer servicing commissions to a new servicing agent, some couldn't/wouldn't. If you asked for A to be removed as you no longer had any dealsing most typically kept it for themselves.
I really wouldnt lose any sleep over it, not much you can do from what I know. I'd still be a little bit miffed mind.
Simpo Two said:
As Captain Sensible says, it looks like 'B' was the adviser but 'A' got the money. So if 'A' wasn't the adviser they weren't entitled to it...
As IFA A sold you the prodiuct originlally, they would recieve all commission relating to that investment, both upfront going forward. You could only have one IFA per product.To transfer the ongoing commission to IFA B you would have to sign a Change of Agency form. I'm surpised IFA B didn't ask you to do this, but it's not IFA As fault he didn't.
Plenty of products were sold where a IFA provided up front advice, but then probably never spoke to the client again. The still would have received all ongoing commission relating to that product, as they wrote the business initially.
I'm not saying it's right from a moral angle, but that is how the industry worked at the time. And you don't have a leg to stand on in terms of reclaiming any of that commission from IFA A.
Simpo Two said:
I wonder who thought up 'ongoing commission' originally? It's a damn good wheeze; I could be making a fortune from all my old clients. Let's see, in 1993 I made a video for £17K. 0.5% of that for 23 years is another £1,955!
No - it's not really.Because you would have been paid just £15k upfront and received the royalties afterwards.
You can't just put up the price without repercussions.
Just because you didn't understand how your IFA was paid, doesn't make it a "damn good wheeze".
Again - IFA "A" is entitled to a selling fee up front and an ongoing commission.
And you agreed to it!
As far as I can tell being an IFA is pretty poorly remunerated and isn't some underhand overly profitable business - particularly now.
(I am not an IFA!)
Most people don't want to stump up £500 all in one go for a proper service giving them advice, so the IFAs get paid on commission.
Nothing wrong with that as long as they explain it to you properly!
Simpo Two said:
I could understand a split such that 'A' gets 3% for selling it and then later 'B' gets the 0.5% annually for 'advising' on it, but Standard Life told me it had been paid to 'A' for the whole 16 years - because they hadn't received any instruction to do otherwise. I can't fault them for that, and of course valuation statements never say 'Payment to IFA: £x', it's spirited away invisibly.
As Captain Sensible says, it looks like 'B' was the adviser but 'A' got the money. So if 'A' wasn't the adviser they weren't entitled to it...
There is no such thing as "selling" you are paying for advice.As Captain Sensible says, it looks like 'B' was the adviser but 'A' got the money. So if 'A' wasn't the adviser they weren't entitled to it...
"A" got the money because he got you to invest. It just happened to be split into an upfront charge and ongoing commission (as these things usually are).
Later on, "B" should have taken a look and said, "I agree with A, but I am now your adviser so the ongoing commission is for me".
Sarnie said:
I'd be wondering why Advisor "B" felt the need to not be paid if he took over the advice.....
He was making plenty of money from me in multiple investments so probably didn't spot it. Or maybe he did and SL didn't act on it. Anyway, as I don't think he ever gave me any advice on it it was a fair deal...It certainly looks like 'A' has it tucked up:
I'll gamble 50p on a stamp and see what mood he's in... and find what else he's getting that I'm not aware of.
Thanks everyone for the clarification.
Simpo Two said:
I'll gamble 50p on a stamp and see what mood he's in... and find what else he's getting that I'm not aware of.
You are going to ask him for money back??On what grounds??
No harm in asking I suppose but I can't think of a reason why he would/should!
Good idea to check the others too.
Can you just tell whichever provider to stop commission payments??
Is that allowed?
Simpo Two said:
I wonder who thought up 'ongoing commission' originally? It's a damn good wheeze; I could be making a fortune from all my old clients. Let's see, in 1993 I made a video for £17K. 0.5% of that for 23 years is another £1,955!
I doubt it. There's so much free stuff available on the internet these days I'd be amazed if anybody is still paying to watch those kinds of videos.....
walm said:
You are going to ask him for money back??
On what grounds??
Well, on the grounds of not having been my IFA or looked at my affairs or done anything whatsoever for me for 15 years but just secretly pocketing the cash. I will of course say it more nicely than that.On what grounds??
walm said:
Can you just tell whichever provider to stop commission payments?? Is that allowed?
The note does say 'for the lifetime of the contract' (which I presume that means for the duration of the investment, not for the duration for which he was my IFA). Then again SL said they'd have paid it to IFA 'B' if they'd been told to - which rather blows up the 'contract' idea. Again, both can't be right. The Simpo Triangle Paradox.Gassing Station | Finance | Top of Page | What's New | My Stuff