Commission paid for 15 years after IFA changed

[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).

[Sarnie]

Simpo Two said:

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.

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

The trail commission is a part of the condition of the transaction that took place in 1999, not for being your IFA for the next x amount of years.......

Again, the contract is for the advice provided for that transaction, SL would have moved the payment to the other Advisor if he had taken over the advice, which he obviously didn't......but it's still all the same contract and T&C's.

There is no "secretly pocketing of cash here" just payment on the terms you agreed to in 1999.....

[Sarnie]

Simpo Two said:

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

He did!!!

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

[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

[Sarnie]

You aren't paying him to do nothing.

You are paying him for the work and advice he provided in 1999 and on the terms you agreed to.

If the new IFA did take it over..........in a year or two, wouldn't he also "be getting paid for doing nothing"?

[sidicks]

Simpo Two said:

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'.

You could have paid all the commission upfront, but you elected to pay him via a lower upfront amount with the rest in arrears via FBRC.

[Wacky Racer]

Sarnie said:

You aren't paying him to do nothing.

You are paying him for the work and advice he provided in 1999 and on the terms you agreed to.

If the new IFA did take it over..........in a year or two, wouldn't he also "be getting paid for doing nothing"?

This.

Simpo.....forget it and move on.

[CaptainSensib1e]

Simpo Two said:

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.

So the IFA disclosed that he was getting the commission, but you've now decided he shouldn't have received it even though you agreed to it.

As other posters have said, this is part of his remuneration for the work he originally did.

Even if you didn't buy the fund through an IFA the commission would have been kept by Standard Life as it's part of the annual charge. You couldn't opt out of paying it.

[walm]

Simpo Two said:

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).

Absolutely not.
You had to be forgetful about the contract you signed up to, which you posted earlier and are now trying to get out of for no reason.

And once again the "paradox" you keep going on about - if IFA "B" had said "stick with this investment" then THAT IS ADVICE - HE DESERVES TO GET PAID.
At that point, IFA A's old advice has been superseded so he no longer gets paid. If IFA B never looks at it then obviously he doesn't get the commission and you stick with the old agreement with IFA A.
It's not rocket science.
You don't need to be Jim Simons to work out the complete and utter lack of "paradox" here!

You seem to have a problem with people charging an ongoing fee for "doing nothing" - but that simply isn't what happened.
The advice he gave would have been medium/long term. (Someone earlier suggested about 6 years' worth, which sounds about right.)
You simply chose to pay him in installments not up front.

You are doing the equivalent of complaining that the guy who bought his car in cash doesn't have to make monthly payments!!!

All of the "errors" are YOURS:
- You forgot what you agreed to.
- You didn't review your holdings for nearly 20 years.
- You didn't give IFA "B" all the paperwork.

Feel free to ask for your money back but the chap has absolutely no need to pay you anything.

[Jockman]

IFAs / Brokers need paying for their services. There are some excellent ones I've come across and they have always moderated fees for continuous work.

[Ozzie Osmond]

Magic919 said:

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

It's not as if the IFA has been sending a Christmas card each year saying, "Thanks for this year's commission. Do let me know if there's anything you'd like me to be doing in exchange for the money you're still paying me".

This is just one aspect of the hidden costs and charges which have brought the industry into disrepute.

[walm]

Ozzie Osmond said:

It's not as if the IFA has been sending a Christmas card each year saying, "Thanks for this year's commission. Do let me know if there's anything you'd like me to be doing in exchange for the money you're still paying me".

This is just one aspect of the hidden costs and charges which have brought the industry into disrepute.

Absolutely but it's a catch-22.

If you made people pay a fee up front for completely impartial advice, with no ongoing commission - it would be very large and hence many would avoid proper advice and either not invest or invest inappropriately.

So you need to reduce the "pain" of paying for advice (people really do need the advice!) - which can be done through a system of delayed payments - and even further reduced with slice taken from the assets each year rather than asking for a cheque each year.

And this thread is a good example of how ending up with that system can make some people feel aggrieved.

And you can't limit the number of years the IFA receives commission because you need absolute autonomy to exit an investment if you change your mind.
So ending up with SOME investments only paying commission for say a year, while others pay for 10+ - makes for a reasonable average and let's the IFA earn a crust.

I would much prefer that like a lawyer or private doctor, you just pay for the professional's time and go and see them as regularly as you need.
But if you do that, many people who SHOULD be saving, don't.

[Ozzie Osmond]

^^ Agreed.

[Ginge R]

It's one reason why we have an advice gap now - financial advisers have priced themselves out of the market chasing supposed high net worth clients. It's not a situation entirely of their choosing; more, just one unforeseen (?) consequence of RDR. It's one reason why so called robo propositions have done well.

[Jockman]

walm said:

I would much prefer that like a lawyer or private doctor, you just pay for the professional's time and go and see them as regularly as you need.
But if you do that, many people who SHOULD be saving, don't.

Has the Govt not recently taken measures against trail commission going forward or have I misread that completely?

[Ginge R]

The sunset provision kicked in recently, yes. All in all, very good news for clients.

[gibbon]

This thread demonstrates two things -

1) Read, and comprehend, the smallprint properly.

2) In a low yield environment the old school method of charging used by some funds and IFA is outrageously expensive (imho).

[Ginge R]

I'd be loathe to correlate yield and expense (value of). I'm an adviser, I'm a plodding very methodical one and what I do, I try to do well. But I'm not the arbiter of returns, and I'm not a god. Sure, I can do as much as anything to get the right approach and the right outcomes, but if what I do is expensive when yield and returns are low, it's also expensive when they are high.

The issue for clients to consider is whether they want to pay for objectivity and insight, or not. And I say that without rancour or snottiness. I charge a set fee for establishing investment or retirement portfolios (in the event of either simple or complicated needs - a pittance even though I say it myself) and either one of three services on an ongoing basis - either nothing (it's over to you), 0.5% (light touch) or 0.85% (hands on).

It's up to the client to resolve expense with value I guess. But we now live and work in a market where consumers/clients are very well informed. We can't afford to be as gratuitous as we all (before my time) once seemed to be.

[gibbon]

Ginge R said:

I'd be loathe to correlate yield and expense (value of). I'm an adviser, I'm a plodding very methodical one and what I do, I try to do well. But I'm not the arbiter of returns, and I'm not a god. Sure, I can do as much as anything to get the right approach and the right outcomes, but if what I do is expensive when yield and returns are low, it's also expensive when they are high.

I bow to your knowledge and experience in this field Ginge, however, i have to disagree with your correlation remark.

The relative returns environment is hugely relevant when determining value. Sure, sage advice has always got value, but that value that can be readily justified is somewhat different in a world where 7% returns are a benchmark figure for low to medium risk long term planning, to a world of 1.5% returns being heralded as a success, negative cash interest rates and high value rental yields falling to 3% and equity dividend payouts being slashed (just a few arbitrary examples of course).

Compounded, 0.5% per year in order to hope to make 2-3% is just too much imho. If you can make me 7-10% with a risk profile im happy about then sure, have your 0.5%.

Tax advice, well thats maybe something different.

[Petrus1983]

gibbon said:

Ginge R said:

I'd be loathe to correlate yield and expense (value of). I'm an adviser, I'm a plodding very methodical one and what I do, I try to do well. But I'm not the arbiter of returns, and I'm not a god. Sure, I can do as much as anything to get the right approach and the right outcomes, but if what I do is expensive when yield and returns are low, it's also expensive when they are high.

I bow to your knowledge and experience in this field Ginge, however, i have to disagree with your correlation remark.

The relative returns environment is hugely relevant when determining value. Sure, sage advice has always got value, but that value that can be readily justified is somewhat different in a world where 7% returns are a benchmark figure for low to medium risk long term planning, to a world of 1.5% returns being heralded as a success, negative cash interest rates and high value rental yields falling to 3% and equity dividend payouts being slashed (just a few arbitrary examples of course).

Compounded, 0.5% per year in order to hope to make 2-3% is just too much imho. If you can make me 7-10% with a risk profile im happy about then sure, have your 0.5%.

Tax advice, well thats maybe something different.

It's often harder to build a portfolio targeting 3-5% as there's little leeway for error - target 10% and return -5% and all you have to say is "market is tough" or "you wanted volatility".