COMMISSION TO IFAs

Galstonian

How much renewal commission is there on a re-mortgage? I take it that the offer does not extend to initial commsion (can't see how it could).

Don't have renewal commision on my ISAs, haven't got a personal pension, income protection, etc..

£35 is good if you get back more than £35 (obviously) unless you could move things around and get a cheaper deal which saved more than £35.

For example with ISA commission could you start a new ISA each year with a discount/refund broker and transfer exisiting fund in?

payless

Initial comm on a remtg is on between 0.25% - 0.45%
of loan, only a couple of lenders pay renewal.

Of course you will have to do your own research for the remortgage, as they are execution only...

execution only..no advice... your choice no come back

Mtg execution only - rumour that lenders will cut / stop commissions to brokers placing buisness but not giving advice.

Margains must be tight, as this firm will have to be regulated and thus pay, FSA, FOS, FSCS & PI fees on top of the normal fees a business pays (salaries, NI, premises, heat/light, IT systems, bank charges for collecting/issuing all these small amounts)

But hey if they have a business plan that works , and you can save more than you spend and are happy with the no advice from them then it may be a winner.

Darryl

My chat with the CEO of Intelligent Money provided the following answers to some of Martin's reservations:

There are a number of elements that need considering here

i. For buying ISAs and unit trusts, the price is made up both from the discount on commission & the buying arrangement the company has with a fund manager. This can mean one company takes more money but still offers a lower price.

You can apparently still get the best price on investments, insurances, pensions etc. Get the best quote from a discount broker, but when you fill in the application form, enter IM's broker code in the relevant box on the form, or just send a letter with your application to the provider stating that you want your broker/adviser to be IM.

ii. An annual fee means you pay when you dont use it

By switching to IM, you'll always use it, won't you?

iii. Cavendish online rebates all commission for a one off fee - for something like life assurance, if this is all you will buy then as it lasts 25 years this is a much cheaper way to do it.

Agreed - if this is the only product you buy. Cavendish don't rebate on mortgages, pensions, income protection schemes, etc.

It annoys me when I see the amount that some brokers/IFAs get for 'helping' me do things like re-mortgage - in my experience I'd rather apply direct and get the commission myself. But I can't because I'm not regsitered/approved by FSA or something. Which has always sounded like financial services protectionism to me.

iv. If you cancel this policy - ie stop pyaing the £35 (which is only an offer price, it could be higher after Feb) the company retains the commission without paying you a cheque. I dont like this. It means you are locked in for the life of a product.

If you cancel the membership, then IM get the commissions. But this is just like a normal IFA, so you don't 'technically' lose. How many IFAs will give you back all the commission they receive on products you buy through them, for just a £35 fee? I see the argument as 'pay a little, and benefit' else 'pay nothing, and let IFAs fill their greedy pockets'

I think this only works if you have a lot of products that attract commission. But, as most of us have a mortgage, pension and some kind of life insurance, don't you think this might actually be a good money-saving/making idea?

I'd like to see IM provide some case study facts and figures.

Darryl.

System

Hi, I'm Julian Penniston-Hill, the CEO of Intelligent Money. Darrly has indeed spoken to me about our service and after looking at the comments posted here it seems that some clarification is needed.

Firstly IM offers a service that re-directs ALL commissions payable on your savings and investments back to you.

Initial commission can already be claimed back by anyone who uses a discount broker. The problem is that discount brokers (I used to be a director of one of the largest firms) know very well that initial commission is a drop in the ocean when compared to the revenue they will receive over the years from renewal commission.

...why do you think they are so happy to give the initial commission up... could it be the renewal commission.

A £7,000 ISA will cost you £210 in initial commission (whatever discount you can cliam from a discount broker on top of this you can equally get from IM), but the renewal commission over 20 years (and remember that the only REAL advantage of an ISA is the tax free income you receive in retirement) will cost you around £7,000. Over 40 years it is more than double this.

If a 25 year old saves £200 a month they may NEVER FIND OUT that their fund has been reduced by over £60,000 to pay commission to an adviser by the time they retire at 65.

We are exposing this. Our website contains nothing but factual information. We are Authorised and Regulated by the Financial Services Authority and if what we offer sounds to good to be true then call them and ask.

The cost of renewal commission to the british public is between £1.5bn - £3.6bn EACH YEAR.

(Martin, we have assumed that investors know how to reclaim initial commission through a discount broker so have not dwelt on initial commission)

The sums involved are scandalous.

I have spent the last year (and a serious ammount of money) setting this company up.

I cannot answer every query over the phone but post a question on this (excellent) site and I will do my best to reply ASAP.

The national press have seen the figures and some (The observer, pages 1,2 & 3 of their cash section, The Sunday Telegraph, page 1 of their money section, The Daily Express money section) have disclosed our findings, and this weekend the FT and The News Of The World are also exposing the scandal of true cost of renewal commission to you, the investor.

This is now being picked up by many TV programs and you should be hearing a lot more from us in the future.

Please take our findings seriously as our regulated status prohibits us from posting incorrect information.

Your comments will be welcome.

Julian Penniston-Hill
Intelligent Money

MSE_Martin

Julian. It's lovely to see you on the boards. I saw the press release you put out - interesting note - nothing new to me - I've been writing and broadcasting about that for years.

So let's cut to the chase. The key isn't
a. Is youroffer better than IFAs
or
b. Is your offer better than most discount brokers
it is
c. Is your offer the best on the market.
Second best ain't a go'er for me.

As you've brought your point to the boards (which is great).

Perhaps you'd specifically address my notes above. I have no axe to grind, if you turn out to be cheapest wonderful - you'll receive a whole hearted recommendation - Im just not sure your costs justify the gain. Even on a For example if your annual commission rebate is 0.5% of fund even at £30 a year, that means it's a £6000 investment until it's worth using you over a standard non annual rebating discounter. Never mind Cavendish who these days rebates both initial and annual - for a one off fee not an annually recurring one.

If you could address this and my notes above i'd be grateful

All the best

martin

Chesney_Hawkes

I am slightly confused by what I have read! (which isnt hard) I have a mortgage and an endowment linked to it. I have an isa which had a lump sum payed into it for a saving period of 10 years, which has ran for 4 years. i also have an insurance life policy in my wifes name linked to the mortgage.
Do I qualify for annual returns of commision on these products through the IM provisions mentioned or Cavendish???? :-/

System

Martin

To answer your first three points;

A. We do not offer advice so If that is what someone needs they should use an IFA, but we recommend they use a fee based IFA and get the commissions back through Intelligent Money.

B. Discount brokers still keep the renewal commissions. This actually costs you more over the life of your investments than the renewal commission. There are some notable exceptions such as Cavendish, but Cavendish charge you between £20-£25 to register an investment with them (the one off fee) PLUS they do have an annually recuring fee as they also take £10 a year from each investment you hold. For some reason they are not clear about fund supermarkets and say that they will charge you £10 a year for EACH FUND you hold within a supermarket (even though there is no more administration for them as the supermarkets send commission details per client, regardless of the number of funds held).

C. So yes I believe we are the best option available for most people. Cavendish have a vested interest in getting you to take out more investments as this increases their revenue. Intelligent Money does not.

Also for the one annual fee of £35 (anyone joining in the offer period is guaranteed that this will never rise - subject to inflation - over the years) you can register not only PEPs, ISAs and Bonds, but also your personal pension plan, life insurance, critical illness, income protection, re-mortgages, FSAVCs, and so on. We will be adding many more products to this list over the coming weeks and months.

It is also the case that Intelligent Money is a whole of life proposition. We do not offer a quick reward (unless you are making a new investment or taking out a new insurance policy or mortgage of course) but instead pass you back every penny of commission over the years, which of course means the rewards get higher for each member every year that there funds grow.

You usually need £7,000 or more in assets to cover IM's annual £35 fee, but this is £7,000 across ALL of your investments, rather than just one of them.

Having said that, you may have an insurance policy that is paying out more than £35 a year in renewal commission and no investments at all - so you would still be better of with Intelligent Money.

Anyone who uses the commission calculator on our website will instantly find out if we can save them money.

I'm not saying we are the best option for everybody, but we have used independent research that shows 38 million people in the UK would financially gain by joining Intelligent Money.

Have another look at Cavendish by the way, as I have mentioned they also charge an annual fee on top of the registration fee.

Also in response to Simon Mc, we return the commission annually as all companies pay commission at different times (a handfull monthly, most evey six months and some annually) and therefore you nee to be a member for at least 12 months and 1 day to ensure you receive a whole years commission back.

The commissions we receive are not invested to make us a fortune each year but held in a trustee account on your behalf. We do take the interest on this and this is built into our business model in order to reduce our charge to you.

If we ever got to the stage when we were collecting £1bn a year on our clients behalf then we would be able to reduce our charge to you further (at the right critical mass it would theoretically be possible to charge you nothing for our service) and we state on our website that if we are in a position to do this then all members who have joined during our fixed offer period will automatically have their annual £35 reduced.

I know of no other company looking to launch the same service that we offer for no fee, and having spent the last year investing in the technology to provide the service for £35 a year can not take seriously any company that makes a claim they can do this.

Also, there is no other service that will return the annual commissions for the life of your investment for a one off fee. Anyone making this claim in the future should be avioded as it would be impossible to guarantee they are still in business in 'x' years time if they do not have a regular cash flow, and in that case they are more likely to be taking your cash now with no care as to how they can return your money in the future.

In short, Intelligent Money has been set up taking into acount all of these issues and still provides the cheapest method for you to get your commission back in the vast majority of cases - and ensure we are still around in the future to do this. We are also the only company to charge a fixed fee per individual rather than per investment you hold, and we are also the only company to apply this to all commission payments rather than just PEPs, ISAs and bonds.

The question I would like to put to everyone is "do you really know how much commission will cost you personally, throughout your life time?" the answer can be found in our commission calculators - these calculators provide this information for the first time ever. It is a massive drain on everybody's finances and Intelligent Money are the first and only company to expose the TRUE cost of these often hidden charges.

If you choose to join us or not, at least find out what you're paying. That is one bit of free information everyone should know about.

Julian Penniston-Hill

Galstonian

It is an interesting service but one of the things it certainly lacks is any clear way for people to determine whether they can benefit from it. Can you suggest a method which most people would be able to use to determine how much renewal commission is built into the products they have already bought? You give some examples but they are vague and use figures which will not apply to all - your £7000 ISA example is presumably a fund based ISA not a tracker and what about the many people who have a mini cash ISA? If you realy wanted to make it attractive to everone then I would suggest that you only take the renewal commission and not the £35 fee if the total commission turns out to be less than £35 - how could anyone refuse then?

System

Galstonian

The examples in our website are only there for guidance.

The commission calculator will tell you exactly how much commission costs you. You are then free to decide if you want to join IM to get this money back.

Many trackers also pay renewal commission (Legal & General for example and most high street bank trackers).

As for the £35 pound cost, if the commissions payable your PEP's, ISAs, Personal Pensions, Insurance policies, etc. do not amount to £35 (and our calculator will give you a very good idea of this) then, of course, you should not join IM.

Julian Penniston-Hill

System

Re: Chesney's question

Hi,

I am slightly confused by what I have read! (which isnt hard) I have a mortgage - [this only pays initial commission - if you re-mortgage you will get any initial commission back from IM] - and an endowment - [this will pay renewal commission that IM can claim back for you - Cavendish don't offer this service] - linked to it. I have an isa which had a lump sum payed into it - [the initial commission has already been paid - IM will be able to reclaim the reneal commission for you. If you are making any further contributions - lump sum or monthly payments then both the initial and renewal commissions can be claimed back through IM] - for a saving period of 10 years, which has ran for 4 years. i also have an insurance life policy in my wifes name linked to the mortgage - [she can claim beck the renewal commission, but this on its own may not cover the £35 mambership fee she has to pay - however, next week we launch an insurance re-broking service where she could lower her premiums and get back the initial commission].

Do I qualify for annual returns of commision on these products through the IM provisions mentioned or Cavendish

Cavendish do not offer commission back on endowments, insurance, insurance re-broking or re-mortgages and so can only pass you back commission on your ISA. They charge you £20 to register your ISA and £10 a year thereafter.

Intelligent Money will give you back the commission on everything for a flat £35 a year.

You will need to either use our calculator on our website or call your product providers who, by law, have to tell you how much commission is being paid each year on your products.

I hope this answers your question. I know it is confusing but the industry has made it this way so you don't ever really know what you are paying and where this money is going.