Commission paid for 15 years after IFA changed

[Simpo Two]

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!

[Simpo Two]

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.

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]

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]

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.

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...

[Simpo Two]

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!

[Simpo Two]

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]

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.

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.

[Simpo Two]

Magic919 said:

'Secretly pocketing the cash' is a funny concept. I presume it's just the OP that sees it that way.

It was a little emotive I agree. Perhaps I should have said 'He was receiving money from my investment for 15 years and neither he nor Standard Life told me'.

All I get is a valuation:

Six months ago your OIEC was worth £X
Now your OEIC is worth £X-£500.


That's all. Not 'Less £Y to IFA 'A'. I had to be suspicious and then call to find out. Most investors would never have known (remember you guys are experts).

[Simpo Two]

Sarnie said:

I assume you have some sort of a grudge against this IFA or a reason you would begrudge them this payment?

Not at all, I'm just not in the habit of paying someone not to do something. You must remember that I and most others work in the world of normal business, ie 'Do work, get paid, move on'.

Sarnie said:

He did!!! You posted the details of the commission schedule on the previous page........0.5% of the value on renewal each year......

From 1999, yes. When I moved IFAs I thought the trail went to the new one.

Edited by Simpo Two on Monday 23 May 20:04