COMMISSION TO IFAs

MSE_Martin

Thanks Julian. I dont have any articles planned on these subjects imminently. When I do I will include some numbers from you in my calculations. It seems likely the discussion will be use Cavendish for one offs and you if you've a range of products.

However I will do this properly when i next write on such a subject

martin

payless

Cavendish do not offer commission back on endowments, insurance, insurance re-broking

thats because they quote a lower premium for the same product - with the commission removed,
so instead of paying full price, and then claiming the commission back, you get it cheaper in the first place.

payless

also can you reassure the readers about the points I raised

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.

Also the point about some companies (especially mtg) looking at perhaps stopping payments to execution only mtgs / renewal rebaters

As you see I'm not doubting the scheme , as it looks good , just raing questions.

Darryl

Payless - you seem to promote discount brokers on the basis that their premiums are lower (having factored in the commission they receive).

Perhaps Julian can confirm the suggestion he made to me that:

"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."

Darryl.

payless

You can apparently still get the best price on investments, insurances, pensions

but  if you do that, the provider will pay no commission , and thus IM will give no further rebate.

. 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."

Not sure I agree morally with this - if IM are offering to transact products under their own agency , then surely they should provide the IT facilities to issue the quotes, and no rely on people getting quotes/ paperwork (and possibly advice ??) from other firms

Payless - you seem to promote discount brokers

For  the products that I am authorised to sell ( my business model purposely offers only a limited number of products- as a sole trader don't want to be jack of all trades...) I generally prefer to offer full advice, and then possibly rebate commissions - rebates based on  resources  spent on acquiring / processing the case- anything that this costs the client (net of comms/charges/rebates) - should add value to the transaction.

I have done excution only buisness in the past - but for more complex products its hard to draw the line on when advice is needed.

[ Do I agree with this setup ]

depends on whether the service provided by existing adviser warrants the ongoing payments, and whether the commissions actually rebated my IM  compensate for their fees and the lack of ongoing advice.


There's various types of product that people require advice on, and the initial commission does not warrant the time spent-(or neven no commission paid)  but its the renewals/ future client relatoinship that makes it worthwhile doing.

For example - I have taken 4 calls already today ( Sat morning)  2 on my mobile whilst out shopping, - all the clients needed a bit of advice- 3  of which will not lead to any commission, (cash deposits, housing and tax issues) the other might (although only after help check out  his endowment compo offer)- Ok they could have looked up the info, or tried this site- but not everyone wants/ is able to do that.

What if I thought all these clients would transact their next piece of business thro' a discount broker, or move their renewals away-  Do i just turn my mobile off ?  -  Will IM offer that level of service.

In an ideal world we would all offer a full choice of charging structures, with a fee based as the ideal ( thus either rebating comms, or reducing charges)- consumers  should also be able to do own research and get better prices- BUT I  think majority still prefer to pay for advice thro' commissions, and have access to an adviser.

The situation of getting free advice somewhere then transacting eslewhere may lead to advisers charging upfront- as I said not a bad thing- but not what research implies most of the public want.

System

As a said on the phone to Darrly, If you already have an application form and wish to proceed through Intelligent Money you can send a covering letter stating this. Commission will then be paid to IM and back to the individual.

Bearing in mind that we have only offered this service for a few days we do not yet have broker codes with all of the product providers in place (this is because the majority only set up codes on receipt of the first application form - usual industry practise).

As we get these codes they will be posted (along with our additional discounts and then downloadable application forms) on our site.

I agree with payless on most points. Good quality financial advice is a vital (and often rare) commodity. Those advisers who provide this well deserve to be paid for their time, experience and expertise.

Like payless, I also disagree that commission is the best method as it creates a bias (with many advisers) to direct clients into commission paying products and can snowball into very large deductions from the final return (as our website shows).

Whilst IFAs remain working on the basis of getting a commission for selling a product they will never be accepted as true professionals (unlike solicitors and accountants for example).

Working on a fee basis would allow IFAs the professional status they seek, and the ones that provide a good service with thrive as the unwanted element of the industry is exposed and lose their business to the good firms.

Our national IFA survey should help that along, as consumers rate IFAs they have used. Also we are offering a free page of advertising to all IFA firms. We hope to create a directory of the very, very good, and the very, very bad.

Also, by exposing the true cost of commission we hope to change the public's perception of fees Vs commissions.

If this leads to a greater demand for fee based advice the good IFAs will be very happy. Also if people are transacting through IM then this will free up the advisers time spent on paperwork.

As you say yourself payless, fee based advice would be the ideal, and that is what we are trying to achieve. If people take the commission cost seriously then we might start the ball rolling.

IM is not trying to steal business away from IFAs, but instead is trying to create awareness of the hidden cost of commission so that people who are not lucky enough to use websites such as this can become more savvy to what is going on and save money.

They then have an INFORMED choice as to the commission or fee route when they need advice. If they opt for fees then you would have been able to have charged for your time this morning - and justify it by showing your clients the enhancement in their returns when they transact through IM on the basis of your "better than best" advice. They will know you to be an independent professional with their best interests at heart which can only be better for your business when word of mouth speads your service to the ears of people who are not happy with their own current advisers.

Whether Intelligent Money offers the best service to your clients (when compared to Cavendish) will depend on the individual circumstances of the person you are advising. I believe that the fact we already - at launch - cover more products (by the way as with Cavendish you can have commission put back into a product to increase the terms or rebate it back to the client - the choice is yours) and over the coming weeks and months will be adding to this. Couple this with an annual direct debit (rather than a fee for each application, plus a deduction of the frist £10 of renewal commission on EACH investment held) and I believe that us more competitive 9 times out of 10.

As for IFAs losing renewal commission on existing business, that is the consumers choice. We are not telling anyone they have to use us, only that we are their if they choose to.

I believe that the good IFAs will embrace this and be the first to inform their clients that they are very happy to work on a fee basis (perhaps a retainer as well?) to pass on the benefits of IM to their clients, and do so before their clients hear about IM elsewhere and take the opinion that their adviser would rather them not know about this for their own reasons.

I can only urge everyone to actually use the calculator on https://www.intelligentmoney.com to get a picture of the cost of commission to them personally, or for advisers, use the tool for your clients holdings and present them with this information to aid your move into fee based advice before they find out themselves.

I will make the time to keep coming back and answering further questions.

Julian

System

Sorry Darryl (typo!)

Julian

lojo_2

I took a Virgin one mortgage through an IFA - the cost to me would be the same if I set it up online but if the IFA organizes it he gets a fee back. So to me its better to use the IFA and have someone to help you (and bounce another few questions of at the same time) - I am currently changing to SLB with the same deal (he gets a fee - same cost to me even if I did it myself).

Please forgive my lack of IFA commission understanding but does this mean by sorting all policies through the mentioned website I could reclaim the fees.

Darryl

Short answer is 'yes'. But, you may want to talk to the people at Intelligent Money first.

Also, bear in mind that paying the IM membership fee may not be worthwhile if the fees you get back from your mortgage don't cover it. Do you have any other investments, insurances, etc that may also be paying commission to IFAs/brokers?

The more products you can link through IM the better the deal will be.

Darryl.

payless

Suits some people- especially in holding existing policies and not getting an on going service fro current adviser.

Of course you have to be happy with own research (or pay for it via another source) as the comm refund may not be worth it if you choose the wrong deal